Who Ate Business?
10 May, 2012
Who Ate Business?

“Are the things of Shevardnadze era back?”

A businessman…searches for a job. Another businessman is struggling to get out of the five-year old debt accrued from penalties. A third one leaves the country and hides his money abroad. Others staying in Georgia cease to invest in anything and direct their energy to keeping their businesses alive. Free entrepreneurial spirit that emanated from every corner of the country few years ago has gradually evaporated.

 

Business environment is worsening. Outflow of the capital is

intensifying. In 2011, as much as 200 million US dollars of investments rolled out of the country. Simultaneously the inflow of the capital is spiraling down steadily and massively. Business develops no longer. According to various studies conducted by local and international organizations, it’s just a short list of things which appease Georgia these days. The Authorities are adamant not to recognize existence of these problems. In contrast, they protect and give everything to their own businesses, neglecting growing threats that tomorrow the country may plunge into an abyss thanks to such irresponsible practices.

In order to understand the real environment in which independent businesses have to operate, EcoPalitra talked to a businessman, who declined to reveal his identity for understandable reasons.

“I am in the business from 90s. Initially I had a small undertaking abroad. Then I returned to Georgia and founded a new enterprise here. With the previous Authorities, i.e. before the rose revolution, virtually no one used to pay the due taxes. Since 2003 a lot of things changed. They announced tax amnesty which was the right thing to do. Frankly, I and my fellow businessmen used to think that it was good when I paid, say, 10 thousand Lari to the budget and increased this payment to 15 thousand Lari in the following month. For one thing, it meant my business was developing. But it also meant that my developing business ensured growing financial contributions to the state coffers and hence to the development of the country.

It seems easy money spoiled them. It was as if they were addicted to it. When revenues from businesses started to recede, they gradually descended to the lower level and made almost entire private sector go through “the mincing machine” of horrendously inflated tax fines, which were ten and even hundred times more than the realistic amounts. When there is no independent court in the country, business has nothing else to do but accept everything. To pay huge fines and avoid imprisonment, many businessmen had to sell their houses, businesses. A number of them fled abroad. Others were forced to flee. Some of the remaining entrepreneurs were arrested and forced to pay with all their property. In short, business is gripped by fear that the Authorities will raid the  business of any size, be it a factory with millions in turnover or a workshop that hardly generates more than 100 thousand Lari per year. Sooner or later, their long hand will reach every business.

Today, when I pay taxes to the budget, I know this money will go to pockets of bureaucrats via tenders. This can be Gegenava, Kezerashvili or others. In the typical fashion of Shevardnadze’s era, cancerous clans of Governmental businessmen have been emerging. Lucrative tenders are won by the friends of Gigi Ugulava – the mayor of Tbilisi, relatives of the president and others.

Perhaps no more than 20-30% of the money collected from businesses in taxes is actually used to the good of the country, whereas 70-80% is spent on stupidities. Clannish business will never develop the country. When there is a clan, free competition is dead. New offers are not made and businesses are accordingly stagnating.

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