Finance Ministry snubbed the new SME law
30 December, 2010

Georgian government does not view the law on small and medium business as a priority at the moment and therefore, the current law regulates the problem. But the current law includes controversies that lead to taxation disputes and confusion.
It is an open secret that Georgian economy is based on the big business while the entire developed world acknowledges SME to be a driving force of any economy. The US and EU authorities stimulate the sector. Accordingly, SME makes up

about 80% of US economy and 60-70% of EU economy while this segment makes less than 20% in Georgia.
Unlike the civilized west, Georgia still lacks a proper law regulating the SME sector. The tax code and law on foreign investments that regulate SME at the moment is so controversial that it puzzles business and scares investors off.
To streamline the legislative defects and regulate SME sector effectively, Georgian SME Association (GSMEA) worked out a new law focused on SME sector and based on the best international practice, which is tailored to Georgian reality.
However, prior to submitting the draft law to the parliament [as a legislative initiative] authors of the initiative sent the paper to the executive power last October to feel the ground. The answer was “no” from the Ministry of Finances (MOF); the Prime Minister’s office still delays the answer, and the Ministry of Economic Development (MOED) promised to discuss the SME law initiative  with the authors some day.
Levan Kalandadze, Executive Director of GSMEA, thinks that the government very likely has not made an in-depth analysis of the draft law as conclusions provided by MOF were superficial. MOF informed that introduction of the new state regulations stimulating the SME is not a priority at the moment as the sector is well-regulated by current law.
But this law includes outrageous discrepancies that cause confusion and taxation disputes rather than promote transparency in the sector. Tax code and law on foreign investments provide different mutually exclusive definitions of small and medium business.
According to the tax code, only physical law entities with less that annual turnover of GEL 100 thousand are defined as small business and enjoy tax preferences. The definition does not include legal entities. Accordingly, small bakery with turnover of GEL 100 thousand is taxed as a big industry like Heidelberg Cement [for example], which is extremely unfair, Kalandadze believes. The law completely lacks definition of middle-sized business. And it turns out that all business with the turnover of more than GEL 100 thousand is either middle or big.
On the other hand, law on foreign investments stipulate that enterprises employing maximum 20 people and with the annual turnover of GEL 500 thousand are defined as small; enterprises employing maximum 100 persons and with the turnover under GEL 1.5 million are  medium, above these limits is big business.
It is up to tax officers to define the size of the enterprise actually. This makes entrepreneurs to feel discriminated.
“Thus investors face a big puzzle,” Kalandadze explained to Georgian Journal. “When they enter in the country they read the law on foreign investments first of all and when they enter the country they find out that the tax code treats them differently and confusion follows.”
To streamline this controversy GSMEA proposed to define all businesses [except joint stock companies] with annual turnover under GEL 2 million as small. Kalandadze thinks that even this turnover is too insignificant as far as in Europe businesses with the turnover under EUR 10 million are defined as small.
“However  MOF grounds its refusal upon an argument that enterprises with turnover up to GEL 2 million are small business based on the current law and introduction of new special stimulating regulations is not reasonable at the moment. Therefore they do not support this law,” Kalandadze said.
MOED did not shape out its position as yet. On December 15, 2010 during the meeting of Georgian business with Vera Kobalia, Minister of Economy,  Georgian Business Association asked her about MOED approach toward the SME law and she did not turn it down in fact.
“She said that we need to meet to discuss this draft law and let’s see what happens,” Giorgi Isakadze, President of GSMEA, told GJ.

Other Stories
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
Biblusi opens first shop for tourists - Georgian
The largest book shop in Georgia Biblusi opens the first shop specially designated to the needs and interests of tourists and named it Georgian.
Georgia improves by five ranks in the Prosperity Index
In the overall Prosperity Index rankings, Georgia has climbed by 5 positions from 85 to 80 when compared to last year. As such, Georgia is the best performing country in the CIS zone.
The future is bright for electric cars in Georgia
The numerous hybrid cars in the streets of Tbilisi cannot be overlooked. Entrepreneur Sulkhan Gvalia calls them “pagers”, referring to the predecessor of mobile phones.
Georgia’s fight against the big tiny enemy – Asian Parosana
It’s a tiny creature, but the harm it did to the Georgian agriculture sector was and still is immense.
New cable route: from Kobi to Gudauri in 15 minutes
On the 15th of December, cable transport is scheduled to be opened connecting Kobi and Gudauri.
Tourist boom in Gudauri – majority of hotels are booked by foreigners
Gudauri is among the most popular winter resorts in Georgia.
Medical tourism increases in Georgia
In the last 9 months, Georgia was visited by 19 500 foreigners for medical and recovery purposes.
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
Georgia second among the fastest growing tourist destinations in Europe
Georgia is among the fastest growing tourist destinations in Europe. The data is published by the UN World Tourism Organization.
Bitmain launches world digital mining summit in Tbilisi, Georgia
Bitmain CEO Jihan Wu and Roger Ver, CEO of Head Speaker List featuring Circle, and Genesis Mining when Digital Mining Leaders Convene In Tbilisi on September 21-23

Exchange Rates
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
January 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31