Page 30 - GEORptAug20

Georgian sketched 2020 budget envisaging 2.7% of GDP deficit
Georgia’s government had sketched its 2020 budget planning based on assumptions of 5% GDP growth next year and the targeting of a deficit of 2.7%-of-GDP in line with this year’s target, Business Media r​eported,​ citing finance minister Ivane Machavariani.
The public debt to GDP ratio would under the given scenario reach 45%. Budget expenditures are planned at GEL16bn in 2020. Current expenditure would be GEL11bn , infrastructure expenditure would be GEL3.7bn and debt repayment costs would be GEL1bn, according to the broad distribution of expenditures.
GDP is expected to reach GEL48.5bn, or $16.3bn, on an estimated average exchange rate of GEL2.98 to the USD.
The figures will be adjusted in line with the latest exchange rate projections at the time the government completes its budget planning.
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​t​he 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.
30​ GEORGIA Country Report ​August 2020 ​ ​www.intellinews.com