Обзор экономики Грузии за 2004 год
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Private Sector and Human-resource Development in
Author: Lasha Martashvili
E-mail: lmg@bk.ru
(18.02.2004)
TABLE OF CONTENTS
TOC o "1-3" h z u 1. Government Policies. PAGEREF _Toc84649293 h 5
1.1 Government promotion policies of small and medium size enterprises. PAGEREF _Toc84649294 h 5
1.2 National Investment Agency of Georgia.. PAGEREF _Toc84649295 h 5
1.3 Georgian Investment Center. PAGEREF _Toc84649296 h 5
1.2.1 Government’s Export Promotion Policy. PAGEREF _Toc84649297 h 6
1.2.2 Georgian Export Promotion Agency (GEPA) PAGEREF _Toc84649298 h 9
1.4 Foreign Investment Promotion.. PAGEREF _Toc84649299 h 14
1.3.1 Government’s Foreign Investment Promotion Policy. PAGEREF _Toc84649300 h 14
1.3.2 Foreign Investment Advisory Council (FIAC) PAGEREF _Toc84649301 h 21
1.5 Tax Regime. PAGEREF _Toc84649302 h 23
1.3.3 Taxation System and Tax Rates in Georgia. PAGEREF _Toc84649303 h 23
1.3.4 Existing Taxation Practices. PAGEREF _Toc84649304 h 34
1.3.5 Tax Reform Areas. PAGEREF _Toc84649305 h 38
1.6 Legislative Basis for the Operation of the Private Companies. PAGEREF _Toc84649306 h 44
1.5.1 Law of Georgia on Entrepreneurs (LoE) (Corporate Law) PAGEREF _Toc84649307 h 44
1.5.2 Law of Georgia on Securities Market (SML) PAGEREF _Toc84649308 h 51
1.5.3 Employment Regulations in Georgia. PAGEREF _Toc84649309 h 57
1.5.4 Regulations about Real Estate in Georgia. PAGEREF _Toc84649310 h 59
1.7 The Business Environment in Georgia.. PAGEREF _Toc84649311 h 61
1.8 Institutional Arrangements. PAGEREF _Toc84649312 h 64
1.3.1 Securities Industry. PAGEREF _Toc84649313 h 64
2. Society.. PAGEREF _Toc84649314 h 65
2.1 Poverty issues. PAGEREF _Toc84649315 h 65
3. Economics. PAGEREF _Toc84649316 h 70
3.1 Main economic indicators. PAGEREF _Toc84649317 h 70
3.2 Agriculture. PAGEREF _Toc84649319 h 77
3.3 Trade. PAGEREF _Toc84649320 h 104
3.4 Construction.. PAGEREF _Toc84649321 h 106
4. Business. PAGEREF _Toc84649322 h 110
4.1 Company Registration and Licensing System.. PAGEREF _Toc84649323 h 110
4.1.1 Company Registration System.. PAGEREF _Toc84649324 h 110
4.1.2 Company Licensing System.. PAGEREF _Toc84649325 h 117
4.2 Local Enterprises. PAGEREF _Toc84649326 h 119
4.1.3 Joint Stock Companies traded at Georgian Stock Exchange. PAGEREF _Toc84649327 h 120
4.1.4 Joint Stock Companies not traded at Georgian Stock Exchange. PAGEREF _Toc84649333 h 132
4.3 Human-Resource Development in the Private Sector. PAGEREF _Toc84649334 h 134
5. Other Donors’ Activities. PAGEREF _Toc84649336 h 138
5.1 The World Bank and IMF. PAGEREF _Toc84649337 h 138
5.1.1 List of the Active World Bank Projects in Georgia. PAGEREF _Toc84649338 h 138
S – Satisfactory. PAGEREF _Toc84649339 h 138
U - Unsatisfactory. PAGEREF _Toc84649340 h 138
5.1.2 List of the Closed World Bank Projects in Georgia. PAGEREF _Toc84649341 h 139
5.1.3 Description of the Closed World Bank Projects in Georgia. PAGEREF _Toc84649342 h 140
5.1.4 The World Bank and IMF Cooperation in Georgia. PAGEREF _Toc84649343 h 149
5.1.5 The World Bank Country Assistance Strategy for Georgia. PAGEREF _Toc84649344 h 154
5.1.6 The World Bank Partners in Georgia. PAGEREF _Toc84649345 h 161
5.2 USAID.. PAGEREF _Toc84649346 h 162
5.3 EBRD.. PAGEREF _Toc84649347 h 162
5.4 EU.. PAGEREF _Toc84649348 h 162
5.5 GTZ.. PAGEREF _Toc84649349 h 163
5.6 CIDA.. PAGEREF _Toc84649350 h 163
5.7 DFID.. PAGEREF _Toc84649351 h 163
5.8 The Government of the Netherlands. PAGEREF _Toc84649352 h 163
5.9 IFAD.. PAGEREF _Toc84649353 h 164
5.10 UNDP. PAGEREF _Toc84649354 h 164
5.11 UNICEF. PAGEREF _Toc84649355 h 164
Currency
(Exchange rate as of
|
Currency Unit = Georgian Lari (GEL) |
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1 USD = 2.11 GEL 1.0 GEL = 0.47 USD |
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Abbreviations and Acronyms |
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CAS |
Country Assistance Strategy of the World Bank |
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CFAA |
Country Financial Accountability Assessment |
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CIS |
Commonwealth of Independent States |
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CPIA |
Country Policy and Institutional Assessment |
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DFID |
Department for
International Development, |
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EBRD |
European Bank for Reconstruction & Development |
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EDPRP |
Economic Dev’t & Poverty Reduction Program |
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EU |
European Union |
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FAO |
Food and Agriculture Organization |
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FDI |
Foreign Direct Investment |
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FIAS |
Foreign Investment Advisory Service |
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FSAP |
Financial Sector Assessment Program |
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FSU |
Former |
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FY |
Fiscal Year |
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GDP |
Gross Domestic Product |
|
GEL |
Georgian Lari |
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GNP |
Gross National Product |
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GoG |
Government of |
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GSE |
Georgian Stock Exchange |
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GTZ |
German Technical Cooperation |
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IDA |
International Development Association |
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IDF |
Institutional Development Fund |
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IDP |
Internally Displaced Persons |
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IFC |
International Finance Corporation |
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IMF |
International Monetary Fund |
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IOSCO |
The International Organization of Securities Commissions |
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JSC |
Joint Stock Company |
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KfW |
German Financial Cooperation |
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LLC |
Limited Liability Company |
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MDGs |
Millennium Development Goals |
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MoF |
Ministry of Finance |
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NBG |
National Bank of |
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NGO |
Non-Governmental Organization |
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NBG |
National Bank of |
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NGO |
Non-Governmental Organization |
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OECD |
Organization For Economic Coop’n & Development |
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PER |
Public Expenditure Review |
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PPP |
Purchasing Power Parity |
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PRGF |
Poverty Reduction and Growth Facility |
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PRSP |
Poverty Reduction Strategy Paper |
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SAC |
Structural Adjustment Credit |
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SATAC |
Structural Adjustment Technical Assistance Credit |
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SEC |
Security and Exchange Commission |
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SIDA |
Swedish International Development Agency |
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SIF |
Social Investment Fund |
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SME |
Small and Medium Enterprises |
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SRS |
Structural Reform Support Project |
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TACIS |
Technical Assistance to the CIS (EU) |
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UNDP |
United Nations Development Program |
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UNHCR |
United Nations High Commissioner for Refugees |
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USAID |
United States Agency for International Development |
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VAT |
Value Added Tax |
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WTO |
World Trade Organization |
[1] Enactment of this law should be a priority.
Operating a Business - Tax Administration. On the basis of interviews with representatives of the private sector, government officials, and technical assistance experts, it appears that the tax administration system is fraught with problems that seriously constrain the activities of private enterprises. The recurring themes voiced by the private sector as being burdensome for business included the complexity of the tax system, the lack of clarity in some aspects of the Tax Code and the sheer number of taxes itself. Foreign-owned enterprises seem to be particularly affected under the existing system. In keeping with the scope of this study, the discussion is focused on taxation administration. Recommendations on tax policy are confined to those issues that directly affect administrative procedures and impede business activity. It should be noted that the International Monetary Fund, the World Bank and USAID are currently providing assistance to the Government of Georgia on taxation policy issues.
The main recommendations include the following (for more detailed discussion of tax issues please refer to the next paragraph - "1.4 Tax Regime"):
· Adopt and implement the proposed amendments to the Tax Code. These proposed amendments cover a number of policy and tax administration issues. They are broadly in line with IMF recommendations, except the Government proposal for the fixed tax and the elimination of the payroll tax.
· Simplify the procedures for filing VAT. The proposed measures include allowing quarterly, rather than monthly filings for small businesses.
· Establish an effective tax-refund system. The International Monetary Fund has outlined a refund strategy that includes limiting entitlement to immediate refunds, distinguishing claimants with a history of compliance, and using pre-refund audits for high-risk refund claims and post-refund audits for claims of lesser risk.
· Review the micro level target-based system for tax collection. It is important to distinguish between the fiscal macro targets which are an important aspect of revenue administration and micro or firm-level targets which are often arbitrarily established within tax jurisdictions. These targets must be realistic and they should be part of a number of efficiency and effectiveness indicators.
· Improve information compilation and dissemination. Taxpayers must be informed of changes in the Tax Code and related regulations, legal interpretations, and instructions in a timely manner. Also, a credible resource must be established to respond to queries offer binding interpretations of the Tax Code.
Operating a Business – Customs. The State Customs Department (SCD) operates an inland clearance system that requires considerable resources and logistical support for effective control of cargo. In practice, the current system is largely ineffective and prone to fraud and corruption. There is no compendium of the legislation on customs available to the customs service employees or the public. In the absence of common information and an official interpretation of the rules and regulations, the discretionary authority of individual customs officers and offices is strong thereby facilitating corruption.There is significant leakage of cargo transported for inland clearance. Some sources estimate that as much as 50 percent of fuel and cigarette imports are diverted.
Management of the SCD has suffered as a result of frequent changes in the management. Efforts to reform the SCD have been impeded by the lack of political will, competing political agendas, and the frequent changes in leadership. Under these circumstances, the inputs of external advisers have been marginalized and the reforms implemented by previous chairmen have been reversed in many instances. The detailed action plan prepared under the ITS contract and endorsed by the government has been stalled with only marginal progress. The customs reform committee established by the President to lead the reform effort has met irregularly.
The principal recommendations for strengthening and improving the customs service include:
· Implementation of the already approved customs reform program. This is a well developed and comprehensive program that can be implemented over time. It encompasses a number of the IMF and FIAS recommendations. One of the immediate tasks would be to assign priorities for implementation.
· In light of the decision not to renew the ITS contract, it is necessary to immediately develop and implement a framework for carrying out efficient pre-shipment inspection services if it is to be continued after December 30, 2001.The SCD clearly lacks the capacity or the expertise to carry out this function independently.
· Review of the existing regulations for the valuation of cargo and implementation of guidelines that are consistent with the provisions of GATT.
· Revision of the declaration processing procedures to eliminate contact between the import (or broker or freight forwarder) and the customs officer.
· Expansion of the ASYCUDA system to all major customs clearance offices.
· Implementation of risk-based criteria for selecting goods and documents to be examined at all locations where imported goods are cleared.
· Implementation of an information publication and dissemination program.
Operating a Business- Licensing and Permits. The existing regime for
licenses has benefited from extensive efforts to streamline and simplify the
legal framework for licenses. As a result, the current licensing procedures do
not appear to present
significant barriers to investment and business activity in
The
Law on Local
Charges and related normative acts (including municipal regulations) are not entirely clear in defining the
purpose and scope of permits. The criteria and conditions for authorizing and
terminating permits (similar to
licensing conditions) are not clearly specified in the laws and regulations. In
effect, the enforcement of the permit system is arbitrary and subject to abuse
of the compliance provisions
and the assessment of violations. While this permit regime does not generally
impede business in
The main recommendations for strengthening the framework for the system of licensing and permits and facilitating the
streamlining and simplification of the current system in
· Passage and adoption of a strong and clear framework law and implementing regulations on the licensing and permit regimes.
· Review and rationalization of the number and level of legally permissible permits to avoid the proliferation of permits for revenue generation.
· Development of a basic set of guidelines on the procedures for processing and enforcing permits (similar to those in place for licenses).
· Development of a monitoring mechanism within the Ministry of Justice that will ensure consistent enforcement of provisions for permits.
· Publication and dissemination of information on the legally sanctioned licenses and permits (e.g., regulations, procedures, documentation requirements, fees and appeals mechanisms).
Operating a Business- Inspections. The passage of the Law on Supervising Entrepreneurial Activity represented the most recent of a series of attempts to streamline the business inspection process by state and local governments. It is, however, too early to assess the effect of this new law. At the time of the FIAS mission, the implementing regulations had not been completed and the law had not been fully implemented.
The main recommendations to strengthen the implementation of the new regime for inspections include:
· Articulate and publish the mandate of each inspectorate as well as information on definitions of violations, criteria for selecting businesses for inspection, the penalties that may be assessed under specific conditions, and the rights and responsibilities of inspectors and businesses.
· Halt extralegal inspectorate activity pending the registration of all sanctioned inspection activities.
· Establish and enforce procedures for conducting on-site inspections.
· Regulate the payment of penalties and fines resulting from inspections to a central cashier in order to avoid on-site payments and minimize opportunities for corruption.
· Coordinate and rationalize the activities of inspection agencies; implement initiatives for joint training and information sharing among inspection agencies; introduce a code of conduct for inspectors; and train inspectors to understand that their primary function is to ensure public health and safety.
Conclusions
and Next Steps.There is a
general agreement within
Pervasive
corruption and the apparent lack of political will to implement reforms have emerged as two fundamental
issues affecting the business environment in
In addition to making recommendations for solving some of the regulatory, administrative, and institutional issues that need to be addressed in order to improve the business environment in Georgia, the report points out the areas where further review is necessary and where significant technical assistance is already being channeled, albeit with limited impact.
The experience of other countries clearly demonstrates that sustainable change cannot be achieved without government commitment at the highest political levels.Successful and sustained change requires leadership, strong champions, and shared goals among all stakeholders within the government and the private sector. On the basis of shared goals, the process of rationalizing, streamlining, and simplifying bureaucratic procedures can develop, gain momentum, and improve the values of government agencies and transform them into service-oriented organizations. A comprehensive approach to change is necessary, and commitment and time are essential ingredients. Procedural and institutional reforms will require the support of public servants at all levels of government, plus their support for changes in the systems of performance monitoring, evaluation, and rewards.
The Presidential Commission on Support of Private Business already exists as a champion of this initiative. However, the framework for the change agenda must include the participation and inputs of stakeholders at all levels. Stakeholders must be drawn from the public and private sectors. In addition, there is a role for the international donor community in this framework since the incorporation of related donor-sponsored initiatives must be integrated into the change agenda. Chapter V of the report proposes a framework for the development and implementation of the change agenda.
The institutional structure to support the change agenda should include:
· The Presidential Commission. The Commission should serve as the focal point of the change agenda and it should be given the mandate to promote and advocate reforms in collaboration with other parts of the Government.
· An implementation team. The staff of the commission’s secretariat should constitute the core group of the implementation team. The responsibilities of the team would include the development of the Action Plan, coordination of implementation activities, solicitation of donor funds and resources to support reform, coordination of related initiatives, and regular reporting on progress to the Commission.
· A consultative committee. The committee should provide a mechanism for regular consultation with a broad group of stakeholders on various reform initiatives.
The above - mentioned Action Plan should be utilized to document the agreed-upon changes, establish priorities and timeline, provide a basis for accountability, and keep an ongoing record of progress. Therefore, it must be emphasized that the Action Plan is not a static document but one that must evolve over time.
Law of
The Law defines the legal bases for
realizing both foreign and local investments and their protection guarantees on
the
Investments. Investments shall be deemed to beall types of property and intellectual valuables orrights invested and applied for gaining possible profit in the investment activity carried out in the territory of Georgia, such as:
a) Monetary assets, a share, stocks and other securities;
b) Movable and immovable property (real estate) - land, buildings, structures, equipment and other material valuables;
c) Lease rights to land and the use of natural resources (including concession), patents, licenses, know-how, experience and other intellectual valuables;
d) Other property or intellectual valuables or rights provided for by the law.
Investor. An investor shall be deemed to be a physical (individual) or legal
person,as well as an international organization investing in
a) A foreign citizen;
b)
A stateless person temporarily
residing on the
c) A Georgian citizen permanently residing abroad;
d)
A legal person registered
beyond
An enterprise with a foreign investment of notless than 25% shall enjoy the same rights as the foreign investor.
[2] is the principal law on taxation policy and administration. Other legislation that regulate taxation include the Administrative Offences Code, the Criminal Code, bankruptcy legislation, customs legislation, the Law on the Road Fund of Georgia, and the Law on the Medical Insurance Fund of Georgia.
The taxation system in
Taxes Paid by Individuals, Individual Enterprises. TC "2. Taxes Paid by Individuals, Individual Enterprises" f C l "3" [3] are required to submit returns before April 1st of the year following the reporting year. Before the income tax return due date, taxpayers may apply to the tax authorities for an extension of time to submit their returns. Taxpayers who cease entrepreneurial activity must submit a tax return within 30 days of the cessation of activities.
Taxes Paid by Enterprises.tc "3. Taxes Paid by Enterprises" f C l 3[4] As a result of the low registration threshold, the tax administration has to deal with a large number of small businesses as VAT taxpayers who contribute little to total VAT revenues. For example, an increase of the threshold from 24,000 to 100,000 GEL would reduce the number of mandatory taxpayers from around 13,000 to 3,200. It would at the same time reduce the total VAT collection by around 23 percent.A reduction in the number of taxpayers could substantially facilitate the administration of the tax and help combat VAT evasion by permitting a more comprehensive cross-checking of VAT invoices and making it more difficult to establish shell companies for evasion purposes. [5]However, this result can only be achieved if the scope for voluntary registration is reduced. The Ministry of Finance therefore should consider to limit voluntary registration, e.g. by excluding businesses with a turnover below 50,000 GEL.
VAT Distortions. There is increasing frustration with the performance of VAT and
the distortions its creates because the tax net is narrow and businesses are
often unable to deduct VAT payments on their inputs.First, despite the low threshold, the number
of 17, 000 businesses registered is quite low by
international standards.Second, a true
VAT, which is supposed to avoid tax cascading and economic distortions,
requires a prompt and full refund of the part of the tax on inputs which
exceeds the tax due on outputs. This is especially important for exporters. In
Frustration with the distortion effects of the VAT has caused some policy makers to consider whether to replace the VAT with a sales tax. The objective would be to reduce compliance risks by applying the tax to one stage of the business cycle only. There are serious concerns regarding this idea. VAT despite its relatively low efficiency has become the main revenue source, contributing 45 percent to total gross tax revenues in 2001. Experience in other countries shows that sales taxes have a far lower revenue potential than the VAT, because it does not capture the total value added in the production and distribution phases and their rates normally are not higher than 5 percent--because of administrative difficulties. In addition, compliance risks and compliance management challenges would not be reduced because collection would have to rely on the retail sector which is more difficult to administer. Rather than replacing the VAT with a sales tax, the focus should be to improve VAT administration and actually implement the key principles of the tax, such as an effective refund system for exporters. A performance of the tax improves; consideration could then be given later to lowering the standard VAT rate.
Proposed simplified tax. To compensate for the revenue loss caused by increasing the VAT threshold, MoF plans to introduce a simplified tax for taxpayers who are not registered for VAT, and to modify the current presumptive tax for individual enterprises, which raises relatively little revenues (in 2000 actual presumptive tax collection was only 5 million GEL or 0.7 percent of total tax revenues), by changing it to a fixed tax with a broader tax base. The MoF proposal is to levy the simplified tax rate of 7 percent on gross income, which will require some basic accounting.The fixed tax will, similar to the current presumptive tax, be based on the nature of the business activity, the size of the business and the business location; it will include more types of small businesses than the presumptive tax. Although some (Foreign Investor Advisory Service (FIAS) December 2001 report[6]) consider a fixed tax to be extremely complicated, it need not be so. The fixed tax, if well designed, can be transparent and easy to administer tax.It offers no scope for negotiation to taxpayers, does not require detailed bookkeeping, and could reduce the opportunity for corruption and the compliance costs for taxpayers. There are some issues regarding this presumptive taxation scheme:
The combined fixed tax and simplified tax is supposed to compensate for the increase of the VAT threshold. However, estimated revenues from the fixed and the simplified tax are 27 million GEL, which is far less than the expected decrease in VAT revenues. While the increase of the VAT threshold and the introduction of the fixed tax are laudable reforms, the revenue impact of the reform will need to be studied further.
Parliament has rejected the proposed simplified tax because it considers the rate (7 percent) too high and the coverage too narrow. According to some parliamentarians, the scope of the tax should extend to some larger businesses, which clearly reflects the interest of certain business sectors to simplify and reduce taxation. Presumptive taxation based on gross figures should be limited to Small & Medium-Sized Enterprises (SMEs) with no sufficient bookkeeping, while all larger businesses are required to keep books and records and are taxed on a net basis. There is no good reason to extend the scope of the simplified tax to larger tax payers.
Excise Taxation.Due to its
open borders and weak administrative capacity
Income and social tax.The high tax burden of the personal income tax (PIT) and the social security tax provides a strong incentive to evade the payment of these taxes.Although the personal income tax has reasonably progressive rates (from 12 percent to a maximum of 20 percent), the marginal cost of taxes for both employees and employers creates strong incentives not to formalize the labor contract: employees prefer current to future consumption, while employers seek to reduce costs and increase competitiveness. Overall, the taxation rate of the PIT and the social security tax over the net wage is 68 percent.This implies that for each additional GEL paid to worker in net wage, there is 0.68 GEL to be paid in taxes if the contract is formalized. Financing of the pension system continues to suffer from low compliance in the area of social taxes.(for more details see Social Protection Chapter).
Corporate and income tax exemptions. The Tax Code currently includes anumber of exemptions from corporate and personal income tax, which narrow the tax base, increase the discretion of tax inspectors and the potential for corruption. The IMF has recommended to review and abolish many of these exemptions. The Ministry of Finance has started preparing an amendment to the Code eliminating most of the current exemptions from personal and corporate income tax. This includes in particular the exemptions from CIT for enterprises in mountainous regions, the exemption of profit generated by energy renewable sources, consumer appliances and energy saving equipment.However, this proposal to amend the Code will still have to be finally presented to the Parliament, after it was withdrawn in September 2001.
Administrative provisions for
tax enforcement. An essential feature of a good
tax code is a clear definition of tax administration procedures and rights and
obligations of taxpayers and tax officials. A reasonable balance needs to be
defined between the interests of the taxpayer to simplify taxation procedures
and reduce administrative burden and the interest of the tax administration to
effectively enforce taxation. In
Abolishing nuisance taxes.Earlier the World Bank and IMF reports have recommended the elimination of nuisance taxes because they typically have extremely low revenue yield and are a burden for small businesses. The tax package prepared Ministry of Finance included the elimination of some of these nuisance taxes, (e.g., the tax on economic activities, the resort tax, the hotel tax, the advertisement tax, and the tax on the use of local symbols), but no progress has been made partly because these taxes are assigned to local governments. However, due to their very limited revenue potential, they contribute less than 10 percent of total local revenues. Considering the administrative and compliance costs of these taxes the actual revenue gains might even be negative, efforts to eliminate these taxes will need to continue.
[7] Substantial and visible improvements on the ground will be needed to begin dispelling this perception. This also requires a political commitment to abolish practices which protect and support special interests of taxpayer groups by introducing special exemptions in the tax legislation, thus eroding the tax base, or/and executing pressure on the revenue authorities to grant favourable treatment to specific taxpayers. It will also be necessary to reduce the incentives for revenue officials to participate in corrupt practices and to develop the necessary control mechanisms to detect and punish such behaviour.
Efforts to reduce capture and corruption are to be complemented by long-term strategies to improve the tax policy design and build revenue administration capacity. Tax policy reforms should focus on overall policy design issues instead of exclusively discussing the level of tax rates. Eventual tax rate reductions will only be feasible if accompanied by broadening of the tax base and administrative improvements. Key to improving administration is the effective implementation of self-assessment and the fair and equitable treatment of all taxpayers. Two areas that require special attention are (a) customs administration, and (b) enforcement of personal income tax and social security contributions.
Short-term Reform Priorities.While substantial capacity building in tax and customs requires long-term strategies, there are a number of essential short-term reform initiatives, which should be launched immediately, to improve revenue performance and reduce tax-related distortions.
Tax policy. The main challenge is to stabilize the tax policy framework, and avoid ad-hoc short-term policy measures.In general, the revenue impact of tax exemptions should be properly analyzed, and no further exemptions/tax reductions should be introduced without such analysis is explicitly presented in Parliament. Any tax policy changes should be taken in the context of the annual budget. It also recommended that the 2001 tax package prepared by MoF be re-submitted to Parliament, including key elements such as: reducing the scope of exemptions, raising the VAT threshold to GEL 100,000 (or US$50,000) and introducing complementary simplified tax.
Tax administration.A number of actions could be take to support long-term reform efforts:
Discontinue the practice of soliciting advanced payments to meet revenue targets and Design a new performance measurement system with appropriate indicators, supplemented by special incentives to improve revenue administration practices;
Centralize revenue accounts in the Treasury and make payments on “a first come first served basis”;
Begin implementation of special program to control imports through the railway system, especially of petroleum products;
Increase coverage of LTI and focus on improving LTI performance.
- Prepare legislative changes to reintroduce sufficient powers for the tax administration to enforce tax collection.
A Longer-term Agenda.A more comprehensive reform program for the medium and long-term reform of the Georgian revenue system will then need to consider the following issues:
Broadening the base and lowering
tax rates.While some taxes may be relatively high and
may promote non-compliance – especially the general VAT rate of 20 percent and
the combined tax burden on labor – taxes from excisable products are not fully exploited. A longer term tax
policy reform objective for a poor economy like
Past experience
with tax policy reform in
VAT Reform.The VAT should not be replaced by a
sales tax. Rather, the VAT as the mainstay of the revenue system in
Tax Simplification. The elimination of nuisance taxes will facilitate administration
and reduce the administrative burden on small businesses. In
Addressing corruption.The creation of an Inspector General Office (IGO) within the MoR has been a step in the right direction. The work of the IGO should be provided with the appropriate legal and technical instruments to carry out its function. Technically, it is important to develop accurate assessments of where the opportunities for corruption arise, through an analysis of the business process and the use of indirect statistical methods. Legally, the IGO must have the powers to access relevant information from tax-offices and taxpayers. It should also be clear to the agencies and to the public how the recommendations of the IGO would be implemented. The role of the Chamber of Control in evaluating tax performance will no doubt be helped as the IGO builds up strength. The government needs to consider if the current profile of corruption requires development of legal instruments, other than those dealing with corrupt practices in the public sector, to address corruption in the revenue agencies.
Making effective a functional organization.The centrepiece of a modern approach to tax administration is self-assessment. To properly implement self-assessment requires changing the culture, both in government and society, of how taxes are calculated and collected. The direct contact between officials and taxpayers should be reduced, with emphasis shifted to taxpayer services, quick attention to arrears enforcement and selective but effective auditing. Internal control and anti-corruption services should help keep taxpayers and officials honest. Appeals mechanisms should serve to protect taxpayers rights. The extensive advise provided by donors has already acquainted the authorities with the principles of self-assessment. However, the reform agenda continues to be broad and will take time to implement. Te following issues would seem to require special attention:
Registration.It is necessary to review the current registry with emphasis on taxpayers that are not active and looking for quality taxpayers that may be hiding as small or not even registered.
Arrears enforcement.The current stock of arrears plus fines and penalties is large but a large portion of it might not be collectable. It is necessary to make a realistic assessment of what can be collected from the stock and develop timely methods to prevent new arrears from aging, setting clear priorities.
Auditing.There should be a sustained effort to build the quality of auditing. Special attention initially could be placed on critical aspects of the VAT such as VAT refunds, cross-checking of credits and fake invoices. Important to good auditing is the development of risks profiles to guide selection and improve effectiveness. Greater information management capacities available now have to be used to develop such profiles.
LTI. The LTI in not a centre of excellence. Efforts to update the roaster of large taxpayers and to reach coverage of at least 50 percent of the revenues collected by the tax agency are worthwhile, but they have to be sustained. The LTI has to take a more proactive attitude to performance and reform and it is good place to begin developing new incentive mechanisms away from simple revenue targeting.
IDA Support to the Private Sector in
IDA's Policy. To support private sector development and attract needed foreign investment, the World Bank (namely IDA) has developed the Country Assistance Strategy (CAS), which focuses on removing key policy and institutional (including governance) constraints, as well as financial, energy and infrastructure bottlenecks.On the basis of the FY03 Integrated Trade Development Strategy IDA will provide reform support and progress monitoring through the ongoing Enterprise Rehabilitation Project, an FY06 Private Sector Development Project, and the ongoing Business Environment Surveys and Studies.IDA will also provide support (in conjunction with USAID) for improving access to affordable finance through further financial sector reform, and will help reduce trade, transit and marketing costs through the FY05 Trade and Transport Facilitation Project, building on the FY03 South Caucasus Trade and Transport Facilitation Study.IFC will complement these activities through investments in small and medium-sized businesses and, in coordination with USAID, through technical assistance for business development.Support for alleviating energy bottlenecks will be provided by IDA’s ongoing energy portfolio and dialogue.
Support to SMEs.The Small and Medium Scale
Enterprise (SME) sector is a crucial area for potential private sector growth,
and IDA has been supporting the sector through its ongoing Enterprise
Rehabilitation Project.IDA plans,
through the FY06 Private Sector Development Project to provide expanded
support for management training, creation of export-oriented clusters of SMEs,
advice to business associations and government, and monitoring of the business
environment.Additionally, IFC will
conduct a targeted study of the SME sector in
IFC Financial Support to the Private
Sector in
IFC's Policy. IFC’s lending and investments in
Assistance to SME Sector. To reach small and medium enterprises, IFC provided equity and
long-term credit lines to TBC Bank and helped establish Georgia Microfinance
Bank – the ProCredit Bank - the country’s first bank specializing in lending to
micro and small enterprises. In June 2000, IFC purchased
a 10 percent stake in TBC Bank. IFC’s support helped TBC to grow from a “pocket” bank
into the largest and one of the best performing commercial banking institutions
in
Development of Mortgage Lending. In the financial sector, IFC has focused on supporting the development of the housing finance market. The introduction of mortgage financing has allowed individuals for the first time to leverage their residences to increase their standard of living.In 2000, IFC extended a $3 million credit line to the Bank of Georgia, and together with re-flows, this credit line financed over 500 projects totalling $4.5 million. In June 2003, IFC provided a second $5 million credit line to the Bank of Georgia for housing finance and for on-lending to small and medium enterprises.In August 2001, IFC provided a second $3 million loan to TBC Bank to support the development of its mortgage lending.
Facilitation of
Foreign Investments: IFC invested in equity and provided loans to Ksani Glass Factory, a
producer of high-quality glass bottles and packaging. IFC’s The $2.5 million equity investment and $6.3 million loan
supported Ksani’s expansion and modernization.
At project completion, the facility will be producing 40,000 tons of
high quality glass bottles annually with a high level of product
flexibility.In the power sector
IFC provided a $30 million loan to AES Corporation to support the newly
privatized
[8]
LO[9]
MNO[10]
NO[11]
NA[12]
Comments
Principle 1 - Basic shareholder rights.
The corporate governance framework should protect shareholders’ rights. Basic
shareholder rights include the right to: (i) secure methods of ownership registration;
(ii) convey or transfer shares; (iii) obtain relevant information on the
corporation on a timely and regular basis; (iv) participate and vote in
general shareholder meetings; (v) elect members of the (supervisory) board;
and (vi) share in the profits of the corporation.
X
Difficult to access the records of the court enterprise
registers and uncertainties in knowing if shareholders are sharing in
company’s profits
Principle 2 -
Fundamental corporate changes.Shareholders have the right to participate
in, and to be sufficiently informed on, decisions concerning fundamental
corporate changes, such as: (i) amendments to the governing documents of the
company; (ii) the authorization of additional shares; and (iii) extraordinary
transactions that in effect result in the sale of the company.
X
Principle 3 -
Shareholder meetings.
Shareholders should have the opportunity to participate effectively and vote
in general shareholder meetings and should be informed of the rules,
including voting procedures that govern shareholder meetings.
X
Not uncommon practice of failing to hold the required
shareholders’ meetings
Principle 4 -
Proportionate control. Capital structures and arrangements
that enable certain shareholders to obtain a degree of control
disproportionate to their equity ownership should be disclosed.
X
Principle 5 -
Markets for corporate control. Markets for corporate control
should be allowed to function in an efficient and transparent manner. The
rules and procedures governing the acquisition of corporate control in the
capital markets, and extraordinary transactions such as mergers and sales of
substantial portions of corporate assets, should be clearly articulated and
disclosed so that investors understand their rights and recourse.
Transactions should occur at transparent prices and under fair conditions
that protect the rights of all shareholders according to their class.
Anti-takeover devices should not be used to shield management from
accountability.
X
Limited by low liquidity in stock market
Principle 6 - Equal treatment of shareholders. The
corporate governance framework should ensure the equitable treatment of all
shareholders, including minority and foreign shareholders. All shareholders
should have the opportunity to obtain effective redress for violation of
their rights.
All shareholders of the same class should be treated
equally. Within any class, all shareholders should have the same voting
rights. All investors should be able to obtain information about the voting
rights attached to all classes of shares before they purchase. Any changes in
voting rights should be subject to shareholder vote.
X
Effective redress requires review under a court system
that is heavily overburdened and has not yet made any decisions on similar
cases
Principle 7 - Procedures for shareholder meetings. Processes
and procedures for general shareholder meetings should allow for equitable
treatment of all shareholders. Company procedures should not make it unduly
difficult or expensive to cast votes.
X
Principle 8 -
Insider trading. Insider trading and abusive
self-dealing should be prohibited.
X
Effectiveness of legal restrictions limited by low
liquidity of the stock exchange and small size of the business community
Principle 9 - Insider disclosure. Members
of the (supervisory) board and management board should be required to
disclose any material interests they have in transactions or matters
affecting the corporation.
X
Minor role played by supervisory boards in the strategic
guidance of companies
Principle 10 - Rights of stakeholders. The
corporate governance framework should recognize the rights of the
stakeholders as established by law and encourage active cooperation between
corporations and stakeholders in creating wealth, jobs, and the
sustainability of financially sound enterprises.
X
Principle 11 - Corporate disclosure. The
corporate governance framework should ensure that timely and accurate
disclosure is made on all material matters regarding the corporation,
including the financial situation, performance, ownership and governance of
the company. Channels for disseminating information should provide for fair,
timely and cost-efficient access to relevant information by users.
Disclosure should include, but not be limited to,
material information on: (i) the financial and operating results of the
company; (ii) major share ownership and voting rights; (iii) members of the
board and key executives, and their remuneration; (iv) material foreseeable
risk factors; (v) material issues regarding employees and other stakeholders;
(vi) governance structures and policies.
X
Less than complete disclosure by most reporting
companies, particularly of financial and operating results
Principle 12 - Accounting and auditing. Information
should be prepared, audited and disclosed in accordance with high quality
standards of accounting, financial and non-financial disclosure, and audit.
An annual audit should be conducted by an independent auditor in order to
provide an external and objective assurance on the way in which financial
statements have been prepared and presented.
X
Weak auditing practices and an audit law that allows
liability to be capped in the contract between the company and the auditor
Principle 13 - (Supervisory) Board responsibilities. The
corporate governance framework should ensure the strategic guidance of the
company, the effective monitoring of management by the (supervisory) board,
and the (supervisory) board’s accountability to the company and the
shareholders.
(Supervisory) Board members should act on a fully
informed basis, in good faith, with due diligence and care, and in the best
interests of the company and the shareholders.
X
Absence of detailed guidelines for supervisory boards
[13].
Meanwhile, the experience obtained from the Central and Eastern
Europe indicates on crucial importance of CIS, such as investment
funds, in increasing the corporate governance standards and facilitating the
trust amongst investors towards stock markets; and (ii) The NSCG does not have
an authority to supervise private placements.
LO[9]
MNO[10]
NO[11]
NA[12]
Comments
Principle 1 - Basic shareholder rights. The corporate governance framework should protect shareholders’ rights. Basic shareholder rights include the right to: (i) secure methods of ownership registration; (ii) convey or transfer shares; (iii) obtain relevant information on the corporation on a timely and regular basis; (iv) participate and vote in general shareholder meetings; (v) elect members of the (supervisory) board; and (vi) share in the profits of the corporation.
X
Difficult to access the records of the court enterprise registers and uncertainties in knowing if shareholders are sharing in company’s profits
Principle 2 - Fundamental corporate changes.Shareholders have the right to participate in, and to be sufficiently informed on, decisions concerning fundamental corporate changes, such as: (i) amendments to the governing documents of the company; (ii) the authorization of additional shares; and (iii) extraordinary transactions that in effect result in the sale of the company.
X
Principle 3 - Shareholder meetings. Shareholders should have the opportunity to participate effectively and vote in general shareholder meetings and should be informed of the rules, including voting procedures that govern shareholder meetings.
X
Not uncommon practice of failing to hold the required shareholders’ meetings
Principle 4 - Proportionate control. Capital structures and arrangements that enable certain shareholders to obtain a degree of control disproportionate to their equity ownership should be disclosed.
X
Principle 5 - Markets for corporate control. Markets for corporate control should be allowed to function in an efficient and transparent manner. The rules and procedures governing the acquisition of corporate control in the capital markets, and extraordinary transactions such as mergers and sales of substantial portions of corporate assets, should be clearly articulated and disclosed so that investors understand their rights and recourse. Transactions should occur at transparent prices and under fair conditions that protect the rights of all shareholders according to their class. Anti-takeover devices should not be used to shield management from accountability.
X
Limited by low liquidity in stock market
Principle 6 - Equal treatment of shareholders. The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights.
All shareholders of the same class should be treated equally. Within any class, all shareholders should have the same voting rights. All investors should be able to obtain information about the voting rights attached to all classes of shares before they purchase. Any changes in voting rights should be subject to shareholder vote.
X
Effective redress requires review under a court system that is heavily overburdened and has not yet made any decisions on similar cases
Principle 7 - Procedures for shareholder meetings. Processes and procedures for general shareholder meetings should allow for equitable treatment of all shareholders. Company procedures should not make it unduly difficult or expensive to cast votes.
X
Principle 8 - Insider trading. Insider trading and abusive self-dealing should be prohibited.
X
Effectiveness of legal restrictions limited by low liquidity of the stock exchange and small size of the business community
Principle 9 - Insider disclosure. Members of the (supervisory) board and management board should be required to disclose any material interests they have in transactions or matters affecting the corporation.
X
Minor role played by supervisory boards in the strategic guidance of companies
Principle 10 - Rights of stakeholders. The corporate governance framework should recognize the rights of the stakeholders as established by law and encourage active cooperation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.
X
Principle 11 - Corporate disclosure. The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, ownership and governance of the company. Channels for disseminating information should provide for fair, timely and cost-efficient access to relevant information by users.
Disclosure should include, but not be limited to, material information on: (i) the financial and operating results of the company; (ii) major share ownership and voting rights; (iii) members of the board and key executives, and their remuneration; (iv) material foreseeable risk factors; (v) material issues regarding employees and other stakeholders; (vi) governance structures and policies.
X
Less than complete disclosure by most reporting companies, particularly of financial and operating results
Principle 12 - Accounting and auditing. Information should be prepared, audited and disclosed in accordance with high quality standards of accounting, financial and non-financial disclosure, and audit. An annual audit should be conducted by an independent auditor in order to provide an external and objective assurance on the way in which financial statements have been prepared and presented.
X
Weak auditing practices and an audit law that allows liability to be capped in the contract between the company and the auditor
Principle 13 - (Supervisory) Board responsibilities. The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the (supervisory) board, and the (supervisory) board’s accountability to the company and the shareholders.
(Supervisory) Board members should act on a fully informed basis, in good faith, with due diligence and care, and in the best interests of the company and the shareholders.
X
Absence of detailed guidelines for supervisory boards
More specifically, the World Bank (WB) and the International Monetary Fund (IMF), also conducted the Assessment of the Implementation of the Objectives and Principles of Securities Regulation of The International Organization of Securities Commissions (IOSCO) in Georgia. The assessment identified quite a lot of problems in the operation of the securities regulator, the functions of which is assumed by the National Securities Commission of Georgia (NSCG). Namely, the report lists the following problems: (i) NSCG has a seriously insufficient budget; (ii) Code of ethics for NSCG staff is awaited; (iii) No specific oversight program to supervise self-regulatory organizations (SROs) has been established; (iv) Inspection and investigation powers of the NSCG over Reporting Companies and their major shareholders are not adequate; (v) Enforcement power of the NSCG on the basis of criminal legislation is limited; (vi) International Accounting Standards (IAS) are recognized but are not fully adopted in practice; (vii) There in no legislation on Collective Investment Schemes (CIS) in Georgia; (viii) There is no market surveillance and stock watch system to detect abnormal movements and unfair trading practices.
More detailed results of the assessment are summarised in Table 1.2.2.1 below:
Table
1.2.2.1
for Securities Regulation
|
IOSCO Principles for Securities Regulation |
C[14] |
PC[15] |
MNC[16] |
NC[17] |
NA[18] |
Comments |
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|
Principle 1 - Clear responsibilities. The responsibilities of the regulator should be clearly and objectively stated. |
X |
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|
Principle 2 - |
[19][1]Structural
geologic and hydrochemical properties of the so-called geotechtonic zones
account for the distribution of various kinds of mineral waters in Drinkable mineral waters are used for health-restoration not only at resorts, but also outside them in the form of bottled mineral waters. Such as Borjomi, Nabeglavi, Sairme, Ucera, Djava, and Zvare. Borjomi Mineral Water. The Borjomi resort is considered as one of the most spectacular
locations in Besides its beautiful nature and climate, the Borjomi region is famous for its mineral waters, which represent the other major natural curative factor of this place. Instead of natural springs known since older times, gusher-boreholes are being used at present. In terms of chemical composition the mineral waters are of acidulous, hydrocarbonate, sodium variety, containing 0.5 to 1.5 g/l of free carbon dioxide. They also contain ions of chlorine and small amounts of bromine, lithium, barium and some other substances. Temperature of the water in various springs ranges from +17 to 38 C. There are ten capped boreholes at the resort wit a total yield of 700-800 thousand liters. Mineral waters are mainly used as a curative drink, for medical baths, inhalation, and levage of stomach and intestine. They are used as a curative and table drink outside the resort. Borjomi mineral water is the most
popular mineral water available in the CIS. In the 1980s exports reached over
420 million bottles per year. However Borjomi production and sales declined
significantly between 1990-1995 due to the economic collapse in the former In September of 1995 the Georgian Glass and Mineral Water company. N.V. (GG&MW) began to produce Borjomi mineral water at two Soviet – era bottling plants in Borjomi.A short period later the bottling plants, pipelines and quality control systems were brought up to world standards. The Khashuri Glass plant, located 30 km from Borjomi, has also been reconstructed. After being purchased by GG&MW, the production process was modernized and a new automated bottle-packaging system was installed. In 1997, GG&MW obtained the
license and exclusive right to use the Borjomi name until 2018. In order to restore
Borjomi mineral water and make it compatible with international standards,
GG&MW found it essential to cooperate with international financial
institutions, such as: IFC, EBRD, ING Barings, and TBC Group of GG&MW mainly orients its exports towards
the Sairme Mineral Waters. The Sairme resort is situated in the valley of the Tsalabris
tskali river 950 m above sea level and 55 km south of the second biggest town
in The word “Sairme” in Georgian means “a place of deer”. In winter many deer and roes used to come down to the mineral watering places from the nearby woods, therefore the hunters called the place “Sairme.” As it was mentioned above, the Sairme resort is rich with mineral water springs – the major natural curative factor of the resort. Sairme mineral waters are known since the end of the 19th century. In terms of their chemical composition, they are of acidulous hydrocarbonate calcium-sodium kind of acidulous hydrocarbonate sodium Borjomi – like variety. It has been established that “Sairme” acidulos waters have a curative action against diseases of kidneys, urinary tracts, and liver. The only company that bottles Sairme
is the CARTU group. The company uses a German bottling line and produces water
in 1 liter PET and 0.33 and 0.5-liter green glass bottles. The only raw
materials the company imports are capsules for its bottles from A new foreign company with better experience in promotion and distribution could easily enter the Sairme bottling market. This takes into consideration the fact that CARTU has a normal license and is not the exclusive company to bottle Sairme water. Mitarbi Mineral Water. The Mitarbi source is located near the Borjomi resort and is surrounded by picturesque mountains in an unspoilt and unpolluted environment. The debit of the water constitutes 40.000 M per year. Mitarbi was bottled and very successfully
marketed during Soviet times throughout the Mitarbi is prescribed in cases of chronic gastric diseases, stomach and duodena ulcer in remission, chronic hepatitis, chronic cholecystitis, chronic pancreatic disease, and diabetes. Production and sales of Mitarbi
reached its peak in the late eighties, particularly annual sales volume of
Mitarbi then totaled 19 million bottles. After the collapse of the At present the CARTU Group is the only company which has the ordinary type of bottling license (which is not exclusive). The volume of output is low due to promotional and sale problems. Accordingly, a newcomer with better experience and knowledge of the potential markets for mineral waters might find itself in a more advantageous position than CARTU. Nabeglavi Mineral Water. The Nabeglavi resort is located in the Chokhatauri district, 35 km south of the district center and 50 km from the railway station of Samtredia, in the valley of the Gubazeuli river (a tributary of the Supsa river) at the foothills of the Meskheti ridge and 470-490 m above sea level. The resort is protected on the south by mountains covered with mixed woods (oak, beech, hornbeam, fir, and pine). The major natural curative factors are mineral waters, which in terms of their chemical composition fall into the category of acidulous hydrocarbonated sodium waters with a salination of 7.5-8.0 g/l. They also contain solicic acid, bromine and other biologically active substances. Mineral waters are used for medicinal drinking and balneologic procedures. The company “Ckali Margebeli” (Healthy Water) obtained a license for use of the above mentioned water. The company uses PET type plastic bottles (1 L, 1.5-L capacity) and green colored glass bottles (1 L). Presently the company is having problems with the promotion and sale of the product, accordingly it is not working at its full capacity and is looking for a foreign partner with professional knowledge and expertise in the field of mineral waters. Zvare Mineral Water. The Zvare resort is located in the Orjonikidze district, on the western slope of the Likhi Ridge (connecting the lesser and great Caucasus mountains), 600-700 m above sea level, in the valley of the Zvarula-River, 4 km away from the railway station of Moliti. The nearby mountainsides are mainly covered with leaf-bearing woods (oak, beech, hornbeam and other species). Mineral water from Zvare belongs to the class of acidulous, chloridehydrocarbonate, calcium-sodium waters with a mineralization of 5-6 g/l. The daily yield of springs is up to 20,000 litres. Water is considered beneficial for its health properties, it was traditionally used as a refreshing beverage and, at the same time recommended for prophylactics of intestine diseases and healing of metabolism disorders. The company ZVARE Ltd. obtained an exclusive license on Zvare water production (its license for abstraction and use is valid until 2009). Presently the company does not operate. It is looking for a foreign partner, who would help it to update the available facilities, conduct hydro-geological and other professional studies, construction works, and purchase of transport facilities. The Georgian law dealing with all aspects of abstraction, development, exploitation of natural reserves (water) is enacted. Water regulations are Western oriented and cover the labeling, packaging and content of bottled water. The only possible change in regulations could be connected to inevitable transition towards international standards (ISO). In the first place, changes are expected in the field of assessment and quality control of water where the former Soviet State Standards (GOST) are still binding. The present situation of the water market in Georgia and possibilities for development of the water business (due to its unique properties; significant intangible assets, experience of water production, infrastructure and low cost base), and the general situation of the international water market and other significant aspects leads one to predict the possibility of the successful operation of a newcomer in the form of a strong foreign company. Nuts. The hazelnuts of Mediterranean origin have been well known in One
of the advantages of Georgian Tea. At independence in 1991, the country had 64,500 hectares of state-owned tea plantations.Civil war, decline in demand from former markets in the FSU and the loss of state financing have caused much of the area formerly planted to tea to be abandoned. As of January 2002, 37,296 hectares of agriculture land were planted to tea. Tea plantations now occupy 65 percent of Guria’s total agricultural land, 27 percent of Samegrelo’s total agricultural land, 58 percent of Ajara’s total agricultural land and 6 percent of Imereti’s total agricultural land (Table 1). Following the abolition of collective agriculture, land under tea plantations has mostly been privatized in Guria, while in Samegrelo, Ajara, and Imereti most of the tea plantations have been leased out. Tea leaf production data in the early 1990s is extremely unreliable and so not reported here.It is clear that production levels have fallen greatly from those of the late 1980s. Production has generally continued to drift downward since the mid-1990s (Tables 2-3, Figures 1-2). According
to the Ministry of Agriculture and Food, as of During 1994-2001 Georgia was a net
exporter of tea, although it also was a substantial importer and the balance of
trade appears to be turning against Tea remains an important cash crop
among rural households in most of Table 1. Land under Tea Plantations, 2001
Source: State
Department of Statistics of Table 2. Annual Tea Leaf Production in (tons)
Source: State Department of Statistics of Table 3. Tea Leaf Production by Regions, tons
Source: State Department of Statistics of
Table 4. Tea Processing, 1994-2001 (tons)
Source: State Department of Statistics Table 5.
Source: State Department of Statistics, author’s estimates Table 6. Top 10 Export Destinations of Georgian Tea, 1994-2001
Source: State Department of Statistics, author’s estimates Table7. Household Contribution to Total Production All of Georgia excluding Abkhazia
Source: State Department of Statistics, author's estimates [21] or undergo a procedure of legalization and be translated by a certified translator.According to thelaw, the courts are required to process registration applications within 7 days. Registration of amendments to a charter or any other changes to entries are to be processed within 7 days. No official expedited service is available, but reportedly registration can be performed in 1 day if the court registrar has the time and if an additional unofficial payment is made (roughly 100–400 GEL).Box II.2 provides a summary of the official registration fees. A company receives a court resolution when the company is registered. The law on entrepreneurs provides automatic registration by default if the court fails to respond within 7 days. If a company changes its legal address to an address that falls within the jurisdiction of another local court, the company is not required to change its court registration and its registration file stays at the initial court of registration. However, the company must re-register with the local tax office that has jurisdiction over the new legal address. Registration Fees. Registration fees are determined by the company’s legal form. The court stamp duty is currently $180 to register a JSC, $80 to register a LLC, $90 to register a branch of a JSC, and $40 to register a branch of a LLC. Fees for registering changes to entries are half of the fee for registering the respective type of company (i.e. $40 to register changes for an LLC and $90 for a JSC). All the payments charged for notarization of an enterprise’s charter are different in each case and depend on the amount of the authorized capital. The percentage of the amount to be paid is reduced with the increase of the authorized capital and ranges from 3 to 0.05 per cent of the authorized capital. The charge must not be less than GEL 25 and must not be more than GEL 50. It should be noted that a 20% VAT is added to the sum charged for the notarization. Peripheral services can be provided by private lawyers and related professionals at additional cost. Lawyer charge in the range of $300-600 to draft a company’s charter and to provide advice. A notary public typically charges about $30 to certify the documents and about $2 per page to certify copies of the documents. Taxation Department Registration. In accordance with the Cabinet of Ministers Decree 899 (December 31, 1994), within 10 days of completing the company registration process, an investor must register with the local office of the taxation department that has jurisdiction over the legal company address. This registration requirement applies to all tax types except the value-added tax (VAT). VAT registration is required for all firms with total taxable transactions greater than GEL 24,000. A taxpayer registration application package should contain the following documents: (1) Taxpayer registration form (4 copies) (2) Court resolution showing company registration (notarised copy) (3) Charter (original or notarised copy) (4) Minutes of the foundation meeting (original or notarised copy) (5) Decision to set up the company (original or notarised copy) (6) Director’s sample of signature (notarised) (7) Document confirming the legal address of the company (original or notarised copy). In accordance with Decree 899, the Taxation Department is required to issue a taxpayer registration certificate within 10 working days. The compliance with the 10-day limit depends on whether or not operations at local taxation offices are computerized. There is no fee for taxpayer registration. Taxpayers are assigned a 9-digit taxpayer identification number (TIN). The first digit specifies the taxpayer type (1 is for an individual person, 2 is for a legal entity), the next 7 digits are sequential numbers (each local tax office has its own block of 7-digit sequential numbers), and the last digit is a control digit. There is no relation between a court registration number and a TIN. If a company changes its legal address, opens
a branch, changes bank accounts, or makes any other changes that require
registration at the As of June 2001, sole proprietorships are no longer required to register with the courts. They need only to register with the relevant local taxation office. If a company’s total taxable transactions over the previous 12 months equal or exceed 24,000 GEL, the company is required to register for VAT within 1 month of the change in tax liability status. A separate VAT registration certificate is issued. Stamp Approval. In accordance with the amendments to the Law on Entrepreneurs (effective June 1, 2001), company stamps are no longer required, and state institutions have been explicitly prohibited from requiring a company to present a stamp for any purpose. Information regarding this change in the law apparently has not been widely disseminated because in July 2001, many companies and lawyers still complied with the old requirements for company stamps. Further, it appears that the police department continues to issue stamp approvals (at a fee of 10 GEL) despite the change in the law. Department for Statistics Registration. Amendments to the Law on Entrepreneurs and the Administrative Code have eliminated the requirement that a business must register with the Department of Statistics. Under the new regulations, this requirement has been replaced by a notification process between the courts and the Department of Statistics. The new regulations may be summarized as follows: In accordance with the Law on Entrepreneurs,[22] the courts are required to send copies of the court business registration resolutions to the Statistical Department on a monthly basis. This information should be submitted by the 5th day of every month. On Amendments[23] to the Administrative Code in July 2001 have removed the provision that companies must provide a statistical code in order to open a commercial bank account. However, in practice, companies
throughout Public Availability of Information. Company registration data are recorded in the registration card as approved under the law (see in the above). The same format is used to respond to requests for company registration information. The following information is required to complete a registration card: · Name of the local court · Court registration number · Company name · Address · Activities · Equity capital · Names of partner(s), their occupations, and addresses · Names of director(s), their occupations, and addresses · Members of the supervisory board, their occupations, and addresses (if a supervisory board was established) · Representation powers of director(s) · Trade representative (procurator) · Legal status · Date of registration · Remarks As mentioned above, a company may be
registered in any one of 66 local courts throughout esmtbs@gol.ge |
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Required Concentration Courses General Management
Financial Management
Marketing Management
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REQUIRED COURSES |
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ELECTIVECOURSES |
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2 Required Core Courses
9 Required Advanced Core Courses
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MBA Curriculum |
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MBA DIPLOMA PROJECT |
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[1] Presidential Decree 678 calls for elaboration of a new law on privatization of agricultural land and completion of the national land cadastre by the year 2005. Apparently a draft of such a law is already circulated in the Parliament.
[2] Amended September 3, 1997; September 18, 1997; December 12, 1997; February 5, 1998; May 1, 1998; May 13, 1998; May 29, 1998; June 26, 1998; October 13, 1998; October 30, 1998; December 24, 1998; April 2, 1999; April 16, 1999; June 8, 1999; June 9, 1999; June 25, 1999; July 23, 1999; September 9, 1999; December 9, 1999; December 24, 1999; December 28, 1999; March 24, 2000; June 28, 2000; July 13, 2000; September 27, 2000; September 28, 2000; October 11, 2000; October 13, 2000; November 10, 2000; November 24, 2000; December 5, 2000; December 13, 2000; December 29, 2000; March 16, 2001; April 27, 2001; June 8, 2001.
[3] Resident physical persons: who received income that was not taxed
at the source of payment in
[4]In hindsight, the VAT threshold should have been much higher when the VAT was adopted.
[5]For example, it would help screen shell companies created for the very purpose to evade tax payments.
[6]FIAS, Georgia: Study of administrative barriers to investment, December 2001.
[7]This also applies to foreign investors, as numerous
critical articles on taxation in
[8] O: Observed.
[9] LO: Largely Observed.
[10] MNO: Materially Non-Observed.
[11] NO: Non-Observed.
[12] NA: Not Applicable.
[13] Although a draft law on Investment Funds has been prepared with assistance from USAID (IOSCO, 2001)
[14] C: Compliant.
[15] PC: Partially Compliant.
[16] MNC: Materially Non-Compliant.
[17] NC: Non-Compliant.
[18] NA: Not Applicable.
[21] Because Georgia is a member of the 1961 Hague Convention, on the abolition of legalization requirements of documents issued in foreign countries, only documents originating from countries not signatories to the Hague Convention require legalization by the consular offices.
[22]Article 4.3
[23]No. 2132-11s