Technical-loss-tax- exemption is discriminating
12 May, 2011
Technical-loss-tax- exemption is discriminating

Georgian way of tax-exemption of in-process losses poses discrimination risks. Instead of establishing general standards for tax-free waste Georgian tax service adopts a payable, volunteer-based model tailored to each company separately, and scarcely affordable to small business. 
Taxation of technical losses has long topped the rap sheet list of Georgian taxation system. The point is that Georgian tax law charged processing and industrial sector without taking into account in-process waste that affected the business expenses and jacked prices up.

instance if a flour-mill grinds 100 kilogram of corn the actual weight of the produced flour will be about 95 kilogram not 100 kilogram. However Georgian tax officers charged mills as if they produced and sold 100 kilogram of flour.
Also oil and oil product transportation companies claimed they faced natural losses for the oil and oil product lose at least 20% due to evaporation while tax officers charged them as if they sold the imported product without a drop in volumes.
Business has long been requesting government to adopt a practice of the civilized world deducting the in-process losses during tax-calculation but government was dumb to this voice for it was a guaranteed method of fulfilling the state budget.
However, after trumpeting a new business-friendly economic course in frames of which Georgian government came out with sundry initiatives allegedly easing the business-life in the country, government acknowledged in this past April that the technical loss was the top problem to both big and small business alike and voiced its good will to exempt them from taxation.
According to Revenue Service, cap quota of in-process losses will be defined by a special governmental commission headed by Minister of Finances. The Commission will define only natural loss cap quotas while the Revenue Service will be responsible for outlining the marginal coefficients of in-process losses of industrial and manufacturing enterprises, the actual profit of products as well as regulation of technical norms related with processing sector.
“This has been a very large-scale problem pestering both big and small companies,” Nika Gilauri, Prime minister of Georgia, stated at the meeting of the Revenue Service and business people on April 13, 2011. “Now we will create a special commission of technical losses and   it will define [possible] volumes of technical losses of this or that sector…and when the tax inspection will check the company it will take into account these volumes.”
But the administration scheme of this good will seems discriminating and far from the best world practice, Georgian economic analysts say. They fear it cuts much ice with big business rather than the Small and Medium Sized Enterprises (SME) - the sector been always neglected in favor to bigger players in this country. The point is that the Commission service is volunteer, costs expensive, and the marginal coefficient of losses will be defined not generally per sector but per company.  Neither the Revenue Service nor Prime Minister disclosed the price for the volume-calculation service, but economic analysts suppose that it cannot be cheaper than several thousands in national currency. 
“First of all the calculation of exempted volumes should not be payable for the Revenue Service is a state-budget based organization, well-paid and it should not take extra money for the service it ought to implement.”Levan Kalandadze, an economic analyst, said.
Secondly, it is discriminating. It seems unreasonable to calculate loss coefficient separately to a big mill and a smaller one if these two are equipped by similar technique of similar productive capacity. The individual approach may lay ground to discrimination of small companies that can scarcely afford the costly Commission service.
However the preferential position of big business also is comparable. On the other hand this kind of payable tax-exemption kills the idea of tax preference that ideally is focused to cut down unreasonable business expenses. It puts out no palpable choice in fact for business has to extend unreasonable outlays either through unfairly charged taxes or through the fairly calculated Commission service bill. The latter seems the big business privilege. This kind of volunteer and paid-in tax-presumption seems cosmetic and rather in favor to government than to business. Government very likely hates losing a guaranteed tool of keeping the state coffer full. Experts believe the tax-exemption idea must be free, based on common standards covering sectors without exception  and not tailored to each company separately.
“All developed world practices equalization standards,” Davit Narmania, Director Executive of the Center for Economic Problems Research, told Georgian Journal. “Otherwise it is a little bit discriminating when you deduct losses only after a company appeals for assessment loss volumes [for pay]. There must be a mechanism that writes off losses without any appeal. Many countries exercise standard-systems and write off technical losses based on it. We must adopt these international standards to exclude any kind of subjective approach.”

Other Stories
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
TBC Bank and Gazelle Finance have teamed-up to support Medical City, a leading healthcare provider in the western region of Georgia to launch the Western Regional Center Of Modern Medical Technologies.
Equivalent to buried treasure – resources that are underused in Georgia
For 2018 the IMF Commission has forecast an annual economic growth for the Georgian economy of about 5,5%.
Does the quality of Georgian wine increase and how the export affects it
If we look at the data collected about modern Georgian wine, we will find out that the Georgian wines produced between 2015-2017 are much better in terms of their quality and Oenologic features rather than the wines produced between 2009-2011.
Japan simplifies the visa requirements for Georgian citizens
Diplomatic and economic relations between Georgia and Japan are now moving to a new phase. Recently Japan has decided to simplify the visa requirements for Georgian citizens.
M&S (Marks and Spencer) and H&M collections to be produced in Georgia
Garments manufacturer MGMTEX will start production of the M&S and H&M trendy collections from this September.
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
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.
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
November 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