The FINANCIAL — The average cost of cooking one standard Imeretian Khachapuri in November 2016 stood at 3.46 GEL, which is 1.9% higher month-on-month (compared to November 2015). The Khachapuri Index is down up by 5.6% year-on-year (compared to November 2015), suggesting annual deflation as measured by the index.
According to the Khachapuri Index data, the year-on-year price of eggs has declined by 12% (compared to November 2015). This could be explained by the upward trend in domestic egg production. Eggs represent one of the few sectors in Georgian agriculture where the self-sufficient ratio (expresses the magnitude of production in relation to domestic utilization) has been around 100% in the recent years.
Nevertheless, Georgian egg producers are experiencing hard times. In 2008, VAT was applied to eggs, and they became the only primary agricultural product that was taxed in Georgia at the time. In 2012, VAT was also applied to the poultry sector.
It is clear from the table that egg production in Georgia not only meets local demand, but also has some export potential. The tax burden imposed on this sector could be a hindering factor for further development, as the VAT tax creates an unfavorable situation for Georgian producers compared to countries where egg production is tax-free. Georgia exports eggs to Azerbaijan, Armenia and Iraq. In 2015, the export value of eggs increased by 76% compared to 2014 (from $941,000 to $1,660 000). With fewer regulations in place, this increase might have been even higher. The figures in the table provide a hint that VAT taxes collected from this sector provide sizeable revenues for the state. Yet, whether the elimination of this tax has the potential to considerably increase the competitiveness of the Georgian egg sector, merits a thorough investigation.
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