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.

“Companies
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.

Print
Other Stories
Georgia Acquires Up to 400,000 COVID-19 Tests and 50 Ventilators With World Bank Support
With the World Bank's $80 million Emergency COVID-19 Response project financial support and mediation, the government of Georgia was able to procure 147 000 Rapid COVID-19 Antibody and Antigen Test Kits and 250 000 PCR Test, that will triple Georgia's testing capacity to 3000 samples per day by mid-July, - reports World Bank.
Georgian business associations establish Georgian Tourism Industry Alliance
Business associations representing various sector of the hospitality industry in Georgia agreed to establish Georgian Tourism Industry Alliance (GTIA).
IMF approves $200 million for Georgia
The Executive Board of the International Monetary Fund has approved US$200 million financing to Georgia to address the effects of the COVID19 pandemic.
Georgia will be one of the first to open tourist corridors, Economy minister vows
Georgia’s Minister of Economy and Sustainable Development Natia Turnava pledged that Georgia would be one of the first countries to open safe tourist corridors with other countries.
Georgia’s GDP may contract 4%, the worst in the region amid pandemic
International Monetary Fund forecasts a 4% contraction of Georgia’s economy, which very much depends on tourism and money transfers.
Georgian retailers fight for survival as coronavirus pandemic continues
Pandemic has affected everyone worldwide, but one of the most vulnerable are retailers, those who depend on consumers and their spending.
Georgia remains the fifth in terms of budget transparency
According to the 2019 Open Budget Survey (OBS), conducted by the International Budget Partnership (IBP), Georgia got 81 points out of 100 in state budget transparency, the Transparency International Georgia said on Wednesday.
Georgia to receive €1.16 million for agriculture development
Within the GRETA project, the EU, Sweden and Austria launched the Local Development Initiative (LDI), to create great economic opportunities in the organic agriculture sector for farmers, farmer groups, cooperatives, processing units as well as other actors along various organic value chains.
Products rotten amid nationwide lockdown in Georgia
Food chain security is becoming more and more important as lockdown stays in place and farmers cannot transport their products from one place to another.
Georgian government to spend GEL 3.5 billion within crisis management plan
Georgian government has introduced a crisis management plan that consists of different stages. GEL 3.5 billion will be spent to cushion economy but this amount does not cover the post-crisis recovery period.
Georgia to receive €183 million from EU to fight Coronavirus
Due to the economic crisis caused by the pandemic of the coronavirus disease COVID-19, the EU has proposed a new package of macro-financial assistance.
Air traffic to be halted until May 22, GCAA says
Air traffic in Georgia will stay halted until May 22, 2020, Georgian Civil Aviation Agency says in a statement.
Georgian PM discusses support packages from ADB, EBRD
Prime Minister of Georgia Giorgi Gakharia held a video conference with the presidents of the EBRD and ADB regarding the possible assistance and financial resources to be allocated to Georgia due to the challenges associated with the global pandemic.
EBRD to provide €1 billion to Georgia, other countries
The EBRD and Georgia are stepping up cooperation as the country's economy faces the challenge of the coronavirus outbreak – says an official statement published on ebrd.com.
Government closes ski resorts in Georgia over COVID-19
The season at the ski resorts of Georgia closes ahead of schedule, the Prime Minister’s spokesman, Irakli Chikovani, said at a briefing.
Georgia will export armored vehicle Didgori Warrior
A new Georgian armored vehicle Didgori, equipped with a 120mm mobile mortar module, will be exported under the agreement signed between the Military Scientific-Technical Center Delta and one of the countries of the Middle East, the Ministry of Defence said.
Korter: Reliable housing property data in Georgia
It's not a simple job to find fresh homes. But when you use the estate choice service Korter, everything becomes distinct.
Rent a car in Tbilisi – Parent.ge
Are you thinking of booking the best vehicles for your next trip at a very reasonable price? If yes, then this is one of the best decisions you can ever make for yourself.
Pleasant Sunday for the whole family – Renewed Sunday’s brunch at The Biltmore Tbilisi Hotel
Summer, the season of endless fun and vacations, has ended and Tbilisi has become a usually crowded city.
GEL devalues, officials show optimism though
Devaluation of the national currency has sent shockwaves among citizens in Georgia. Officials think that the trend will return to its normal frame, though.
ProCredit Bank’s 20 years of challenges and successes in Georgia and what it means to be a responsible bank
“The bank’s 20-year long presence in Georgia was marked by many challenges and success stories.
Comments on alarming GEL devaluation
The National Bank of Georgia set a new exchange rate, according to which, dollar price became GEL 2.9507 on Tuesday.
Euronews and Silknet sign an MOU to launch “Euronews Georgia”
Euronews and Silknet, Georgia’s leading telecommunications company, are announcing the signing of an MOU in view of launching Euronews Georgia, a news channel and digital platform aimed at a Georgian-speaking audience.
Green Diamond starts to hand over flats to owners as second stage of construction finishes
Second stage of construction of Green Diamond living apartments by MAQRO Construction has finished and process of hand over of flats to owners has started.
Georgian wine tasting in the US came off excellently
Georgian wine tasting in the main cities of the US, New York, Chicago, and Boston went off excellently.
PHOTO OF THE DAY
GEL Exchange Rate
Convertor
12.07.2020
13.07.2020
USD
1
USD
3.0624
3.0624
EUR
1
EUR
3.4593
3.4593
GBP
1
GBP
3.8617
3.8617
RUB
100
RUB
4.3016
4.3016
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
USD
1
USD
3.0624
EUR
1
EUR
3.4593
GBP
1
GBP
3.8617
RUB
100
RUB
4.3016
July 2020
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