Page 27 - GEORptJul19

Source: Finance Ministry
6.1.1 Budget dynamics - tax issues, privatisation plans
BAT director responds to sales effects of tax hikes and smuggling in Georgia
Tobacco producers sales in Georgia dropped by almost 30% during a single month after tax hikes, British American Tobacco (BAT) corporate business director Zviad Skhvitaridze has said.
The country hiked the value-added tax (VAT) and excise taxes for cigarettes and tobacco, which resulted in end-user prices rising by one US dollar per 20-cigarettes compared to prices found in neighbouring countries. The cost of a pack of Winston cigarettes moved up from Georgian lari (GEL) 4.30 ($1.61/€1.41) to GEL4.80 ($1.80/€1.57), while the price of a packet of Camel cigarettes increased from GEL 4.00 ($1.50/€1.31) to GEL 4.50 ($1.68/€1.47).
Skhvitaridze said that the sales decline was prompted by rising black market sales but he said that he expected the situation to improve during the year as smuggling was tackled.
Akaki Zoidze, head of the parliament’s health committee and a lawmaker of the ruling Georgian Dream party, played down the impact of the smuggling, saying that the illegal market covered less than 1% of total sales.
"In the regional context we see that the excise taxes in Armenia, Russia and Azerbaijan are radically low. The difference is more than one dollar [per package]. This fact is quite a great temptation for people engaged in illegal trade. Accordingly, the share of illegal trade may increase. This process has already begun in recent years. Illegal trade and consumption on the lower-end products have reflected in our sales,” he said.
Zoidze added that consumers were obtaining raw tobacco, which is seven to eight times cheaper than imported cigarettes, but was not subject to quality checks. Smuggling and use of raw tobacco would significantly affect the government’s budget, the lawmaker noted.
Cigarette prices increased by an average of 50 tetri ($0.19/€0.16) in Georgia following amendments to the tax code that came into play on January 1.
Meanwhile, privatisation plans for Georgia Post was undergoing preliminary procedures, Economy Minister Natia Turnava said on June 19. In response to a reporter’s question as to whether national railway company Georgian Railway will be privatised, she said the government has no such plans.
6.2 Debt
Georgia - Gross external debt
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
Gross external debt ($ mn)
16,042 16,660 16,881 17,250 17,759 17,416 17,225 17,818 17,828
2011 2012 2013 2014 2015 2016 2017 2018
Gross external debt (% GDP)
81.1 84.6 83.2 84.6 109.0 110.4 114.4 109.6
source: CEIC, World Bank
27 GEORGIA Country Report July 2019 www.intellinews.com