The FINANCIAL — Verdict: Sergi Kapanadze’s statement is TRUE.
Resume: The tax burden is the ratio of budget tax incomes to the GDP. It has been increasing since 2013. It increased by 1.9 percentage points in the period of 2013-2017. The tax burden was 24.8% in 2013 with the estimated figure for 2017 having increased to 26.7%.
An increase in the excise tax rate resulted in a 1.3 percentage point growth of the tax burden and 0.6 of a percentage point decrease in the profit tax burden owing to changes in taxation. The Value Added Tax (VAT) burden, after decreasing by one percentage point in 2013, has once again increased.
In short, Georgia’s tax burden has been increasing for the last five years and is currently at its highest level since 2010.
Analysis
At a session of the Parliament of Georgia, European Georgia Movement for Freedom member, Sergi Kapanadze, stated that the Georgian Dream had increased the tax burden. Mr Kapanadze stated that the ratio of tax incomes to the GDP was 24.8% in 2013 and reached 26% in 2017.
There are five types of national taxes in Georgia. This number did not change after the Georgian Dream came to power. However, some of the tax rates and taxation subjects did indeed change.
Excise Tax: Taxable transactions as well as the export and import of excised goods are subjects of excise tax. The excise tax rate is differentiated for certain types of goods. Of the 11 taxable groups of goods, the excise tax rate increased for vehicle imports. In addition, the excise tax rate increased significantly on tobacco products. From 2013, the excise tax rate for a 20-package of filtered cigarettes increased from GEL 0.6 to GEL 1.7 whilst the excise tax rate for a 20-package of unfiltered cigarettes increased from GEL 0.15 to GEL 0.6. The excise tax rate for fuel products has also increased from 2017. It went up from GEL 250 to GEL 500 for one tonne of petroleum and from GEL 150 to GEL 400 for one tonne of diesel. The excise tax rate also increased for natural gas used as vehicle fuel. It increased from GEL 80 per 1,000 cubic metres to GEL 200. In addition, mobile communications services were also a subject of excise tax until 2018. Initially, the services were taxed at 10%. The rate decreased to 8% in 2016 and to 3% in 2017. Currently, this tax has been abolished for all but international calls.
Income Tax: An individual’s income is subject to an income tax of 20%. The new coalition government believed that a decrease in the income tax rate could not have had any impact upon the low-income segment of the population and instead introduced the so-called “Untaxed Minimum.” This envisioned tax returns for individuals with a yearly income of less than GEL 6,000. However, the aforementioned tax preference was only in force from 2013-2014.
Profit Tax and Value Added Tax (VAT): The rates for both of these taxes have not changed since 2012. The difference between the total incomes and the total expenses of an enterprise is taxable by profit tax at a rate of 15%. However, as a result of changes enacted in May 2016, only distributed income has been taxable starting from 2017. The VAT rate is 18% with imported goods as well as the delivery of goods and services valued at more than GEL 100,000 in one calendar year subjected to the tax.
Import Tax: The import tax rate constitutes 12% and 5% according to particular groups of goods. The import tax rates have not changed under the Georgian Dream government.
Property Tax: The property tax rate ceiling has not been altered since 2012.
It is necessary to calculate the consolidated budget tax incomes to the nominal GDP in order to determine the amount of the tax burden. To do this, we have to calculate the percentage of income going to taxes which was generated from goods and services delivered to the country in the period of one year.
Table 1: Tax Income (%) in 2010-2017
Note* Estimated GDP and tax incomes for a budget year
As we see, the tax burden has had a tendency of growth in the last years and is at 26.7% according to 2017 estimates. Of note is that the Government of Georgia plans to reduce the tax burden to 25% in accordance with its Social and Economic Development Strategy – 2020 although the trend does show the opposite.
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