The Balance Between Tax Incentives and Fiscal Oversight in Legalizing the Shadow Economy.

This study analyzes the balance between tax incentives and fiscal oversight instruments in the process of legalizing the shadow economy in Uzbekistan. It highlights mechanisms for expanding the tax base by limiting cash circulation, digitalizing transactions, and making them more “visible” to tax authorities. The research examines institutional drivers of the shadow economy (high transaction costs, complex administration, and informal employment) and provides an academic justification of policy solutions aimed at reducing them—tax amnesty, the business stability rating system, simplification of certification procedures, and the incentive role of the self-employment regime. The findings indicate that although a “carrot-and-stick” approach may increase compliance costs in the short run, it strengthens transparency in the medium and long term, fosters a level playing field, and stabilizes budget revenues; effectiveness, however, depends directly on digital infrastructure, commission costs, financial literacy, and the integration of oversight systems.