Personal Income Tax Revenue Allocation to District and City Budgets: A Regional Panel Data Econometric Study
DOI:
https://doi.org/10.51699/cajitmf.v7i3.1322Keywords:
fiscal decentralization, personal income tax, panel data, fixed effects, Uzbekistan, local budget reform, difference-in-differences, JEL Classification, H71, H77, C23, O18Abstract
Background: Fiscal decentralization theory predicts that assigning tax revenues to subnational governments enhances allocative efficiency and promotes local economic development. Uzbekistan enacted Law No. ORQ-1011 in December 2024, mandating that at least 50% of personal income tax (PIT) receipts — excluding large taxpayer contributions — be transferred to district and city budgets.
Objective: This study empirically evaluates the effectiveness of this normative reform using district-level PIT revenue data and a suite of panel-data econometric methods.
Methods: A balanced panel of 84 districts over 2017–2025 (N=711 observations) was analyzed using Pooled OLS, Random Effects (RE), and Fixed Effects (FE) estimators, complemented by first-difference (FD) analysis and pre/post comparisons via Welch t-test and Mann–Whitney U-test.
Results: FE estimates show a stable annual log-growth of 32.5% (β=0.325, p<0.001) throughout 2017–2025. The first-difference analysis for 2024–2025 reveals a mean log-change of +0.394 (≈+48.2%), significant at p<0.001. The 2025 growth rate exceeded the pre-policy average by +23.8 percentage points (Welch t=2.58, p=0.011; Mann–Whitney p<0.001). Positive growth was observed in 81.9% of districts.
Conclusions: The evidence strongly supports that the 2025 policy intervention produced a statistically significant and geographically widespread increase in district-level PIT revenues, providing a sound empirical basis for the proposed 50% allocation mechanism.
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