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Saturday, 24 March 2018


Small taxes that claim a lot

12.11.2009  |  17:27

4549.jpegBecause of the crisis the Georgian government was forced to reconsider their attitude to taxes. Desire to make Georgia more investment-attractive was replaced by a trend to squeeze money from businesses. The latest victim of this policy is Kazbegi beer factory in Rustavi. And again rhetoric does not match deed - which is normal for Mikheil Saakashvili. Recently he spoke about improvement of tax environment.

It's easy to start up a business in Georgia - any entrepreneur can confirm that. But it's much harder to keep it running. The state collects over one third of taxes, Business&Finance magazine remarks.


Since the start of this year the country's Tax Code has been greatly simplified due to 200 amendments. In particular the income tax rate went down from 25 to 20 per cent. According to the information of the government over the coming five years this tax will be reduced to 15%. 15% is current profit tax, 1% - property tax and 18% - VAT.

But Western experts recommend that Georgia continue liberalization. And though in early summer the country's regional budget faced deficit because of the crisis, the government put forward the tax reduction initiative nonetheless. Mikheil Saakashvili even proposed solving rate issues by way of a referendum entering such a provision in the Constitution.

Sober-minded experts condemned the initiative that shifts the task of state value onto the people who, in majority, are poor at economics. But on November 12 the parliament started examining these inadequate amendments to the Constitution.

A day earlier, on November 11, Mikheil Saakashvili called the government to improve the tax environment and lighten its burden for businesses. According to him the composition of the Council on Resolution of Tax Disputes must be widened with entrepreneurs to be invited there.

Saakashvili asked not to be in a haste arresting accounts and sealing up failing companies but wait for 48 hours and do what the Finance Minister (not the Tax Code) says. The president also promised to stimulate VAT return paid by the companies.

However against the background of these statements the real tax collection leads to serious consequences up to closure. Two days ago there appeared information that because of tax claims Kazbegi beer plant in Rustavi town may be shut down as stated by its president Gogi Topadze, Business Georgia reports. 

According to Topadze, the tax authorities urge taxing food service for employees as well as the refrigerators and booths the company lends to supermarkets and restaurants to ensure the quality of its products free of charge.

The company's CEO thinks it's a "deliberate campaign against Kazbegi". He is not going to pay this tax out of principle considering it illegal. He also says that 350 employees of Rustavi factory may be left without jobs. The tax service told Topadze not to flare up but go to court.

However the trial on 25 TV (Ajaria) has recently demonstrated how things are solved in court. On October 15 the city court of Batumi didn't meet the claim filed by Channel 25 sustaining the tax act stipulating GEL 277,547 to be paid by the company. Earlier the tax officers claimed even more - GEL 438 thousand. And these are the debts of the company's ex leadership that took hold of the shares illegally.

Another victim of the coming tax increase is local tobacco manufacturers.

Assisted by the WTO Ukraine called Georgia to make excise on import and local cigarettes equal. In order to keep face for the West Georgia didn't defend its interests. The authorities decided to make conditions for local tobacco producers (except for Ajaria Tabacco) more stringent. Naturally by increasing excise on local produce leaving the import excise unchanged.

The Сconservative and Republican parties opposed that. Their leaders Kakha Kukava and Irakli Batiashvili think that a concession to the WTO will result in shutdown of local production, the growth in imports and consequently the loss of several thousand employments. Levan Kalanadze, an economy expert, stated Georgia needs to reconsider conditions of its WTO membership or even secede.

Aggravation of the tax climate was felt by cell operators caught in non-payment. The Georgian Ministry of Finance wrote out a fine to Geocell for charging the services that were not provided in order to avoid paying the VAT.

Another example of increased tax claims - the start of "repressions" against minor entrepreneurs and a new campaign for cash registers in kiosques. Late in October the tax authorities sealed up a number of small market shops because of that.

On October 21 their owners went on a rally in the streets of Tbilisi, GHN reported. It was the Conservative party that supported the protesters.

Later Koba Davitashvili chairing the People's Party spoke in their defense. He believes that instead of cash registers a fixed tax should be imposed. "The turnover index for a previous year should be considered to determine the amount of fixed tax", - he stated.


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