Will Georgia See the Emergence of Differentiated Tax Zones?
30 April, 2015
Will Georgia See the Emergence of Differentiated Tax Zones?
Today’s Georgia is rife with problems. The list is quite impressive, and not in a good way: An import-oriented economy, unemployment, overcrowded cities, a near-empty countryside, the migration of able-bodied citizens from the country, etc. Bpn.ge visited Temur Maisuradze, vice chairman of the Parliamentary Committee on Branch Economics and Economic policy, and asked him a simple question: What is the way out of this situation? He replied that introduction of differentiated tax zones is the panacea the country needs.

should pay taxes depending not on where they are based, but where they produce their goods. If Tbilisi is to become the zone of highest tax percentage, Kutaisi’s taxes should be 2-3 percent less and so on”

– What exactly do you mean by “differentiated tax zones”?

– I think that the regions, which are slowly becoming more and more abandoned, should be completely relieved of taxes. More or less loosely populated zones should have a 2-3 percent tax, densely populated ones – 4 percent and so on. Tbilisi should be the highest taxed zone, which will essentially leave it the way it is now. I doubt it will be hard to determine the regions that require nullification of taxes. Companies, however, should pay taxes depending not on where they are based, but where they produce their goods. If Tbilisi is to become the zone of highest tax percentage, Kutaisi’s taxes should begeotv.ge 2-3 percent less and so on.

“Businesses who begin their operation in so-called null zones should also receive more lenient loans”

– Do you really think that businesses that had their production established years ago in places such as Tbilisi, Batumi or any other big city, will transfer the process to some nearly deserted region?

– Allow me to counter with a question of my own: Why would company such as Coca-Cola remain in Tbilisi and pay high taxes if it can go to the village of Utsera, for example, or any other place where it can operate almost or completely tax-free – especially if local water is cleaner, landscape is better and the conditions for running a business more convenient? Naturally, businesses who begin their operation in so-called null zones should also receive more lenient loans. Georgia does not suffer from transportation and communication problems, so one potential impediment is already out of the way. I think that after such a law is implemented, a lot of business activity will move out of Tbilisi and equally distribute its workload and resources across the regions. Tbilisi will remain an administrative center.
I think that such a law will give a great boost to economic activity in the country, since it will make the entirety of Georgia attractive to investors. This, in turn, will increase the amount of investment. This claim can be backed up by the cheapness of resources and labor in the regions. We should also do our best to make loans more available to businessmen operating there. All these measures, if taken together, will serve as a massive stimulating factor for transference of business beyond the big cities. If goods produced in low-tax zones will manage to successfully compete with, for example, Tbilisi-produced goods, businesses will become even further stimulated to move.

geotv.ge“At the moment Racha is almost completely deserted, yet its potential is immense. Its woods are brimming with apples and pears, and yet nobody picks and sells them”

– Let me remind you that Georgia’s regions suffer from massive unemployment and are the main source of labor migration.

– Unfortunately, you are right. I don’t know any other small country where this issue is so acute. The regions are getting slowly depleted of people, while the two largest cities – Tbilisi and Batumi – are becoming crowded beyond measure. Differentiated tax zones and movement of business activity that will almost immediately follow their implementation will trigger a reflux of labor migrants to their home towns and villages. People will come to fill the emerging workplaces. When you have a student from a countryside studying engineering or any other technical profession in Tbilisi, returning to his home village is the last thing he wants because he knows there is no work to be found in that place. However, if he knows that he will be able to get himself a decent, high-paying job there, he will be stimulated to both complete his education and return. What I am offering is a systemic approach, not artificial creation of a farm here and a factory there; such things bring no tangible results.

– Have you given any thought to what business fields will be most promising if the scenario you describe comes true?

– Heavily forested areas are excellent for producing furniture. Such areas include Utsera, Borjomi, Akhaldaba and many others. Or take the region of Racha, for example: At the moment it is almost completely deserted, yet its potential is immense. Its woods are brimming with apples and pears, and yet nobody picks and sells them. Tons of fruit simply rot away every year because nobody cares. Such a place is the most fertile ground for a juice-producing factory. If a company capable of recycling this fruit into juice and competing with Kula [a popular Georgian juice producer] appears, why shouldn’t we lend it a hand? People will flock there in hundreds, picking fruit and turning them in for monetary rewards. Packaging factories will emerge next, all in dire need of workers. And voila, a once-empty area is now bustling with activity.
This is what I am offering – a way to quickly revive Georgia’s economy. People will gladly return to places they were born and raised if there is work to do there.

Other Stories
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
The procedures for exportating Georgian wine to Japan will be simplified
According to the National Wine Agency (the NWA), 4 Georgian laboratories have been added to the list of foreign laboratories registered in Japan, which will significantly simplify Georgian wine import procedures in Japan.
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
September 2018
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