Digitalization and Shadow-Economy Reduction in Uzbekistan: The Role of Electronic Payments, E-Government, and Tax Administration

Digitalization serves as a key driver of transparency and efficiency in public administration and economic activities. It also provides governments with new tools to monitor economic activity and strengthen fiscal governance. This study examines how improvement in digital economy and its tools jointly influence the size of shadow economy and hidden activities in Uzbekistan. Using official secondary data, the research considers three indicators: the United Nations E-Government Development Index, the value of point-of-sale transactions, and tax revenue as a share of GDP. These indicators reflect different dimensions of digital development and the government's capacity to support a more transparent and formal economy. Descriptive statistics, Pearson correlation analysis, and Ordinary Least Squares regression are employed to examine the relationships between digital development and the shadow economy, while tax revenue is considered to provide additional fiscal context. The findings indicate that digitalization indicators increased considerably, whereas the shadow economy share fluctuated throughout the study period. The estimated relationships between the individual digitalization indicators and the shadow economy are negative. These findings suggest that technological progress alone may not be sufficient to ensure a sustained reduction in informal economic activity. The study highlights the importance of strengthening digital tax administration, improving transaction transparency, and enhancing tax compliance to support economic formalization and economic security in Uzbekistan. Overall, the research contributes to understanding the relationship between digital development and shadow economy within Uzbekistan's evolving economic environment.