How to overcome the barriers for enterpreneural activity in Georgia
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Date
2019
Authors
Journal Title
Journal ISSN
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Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
A number of actions are being taken to develop and promote entrepreneurship in
Georgia. It is expressed both in the development and implementation of various strategies
and in tax reform. However, entrepreneurs still face various problems and barriers. 120
entrepreneurs were interviewed. The purpose of this paper is to identify the barriers to
entrepreneurial activity and the problematic issues facing them; identifying the gaps in
Georgia’s tax system in terms of entrepreneurs and identifying the type of tax with the
greatest pressure; also identifying barriers to other non-tax aspects for entrepreneurs.
The development of the entrepreneurial environment and the promotion of entrepreneurs
are very important for the state. A number of tax reforms have been implemented
in Georgia (Introduction of special taxation regimes; the so-called profit tax Introduction
of Estonian model; liberalization of tax sanctions; implementation of a United Treasury
Code; Automatic VAT refund service) that were adopted to support entrepreneurs, to
expand their activities and facilitate their relationship with the tax authority. Nevertheless,
entrepreneurs still face certain barriers and problems, which were identified by research. 120 entrepreneurs across Georgia were interviewed; the number of entrepreneurs surveyed by type of activity is as follows: Service (31%), Trade (29%), Production (14%), Construction (11%), Tourism (7%), Agriculture (6%), 1% -1% Energy and Finance sector.
The magnitude of the tax rates in force in the country and according to the objects of
taxation, Georgia is one of the most liberal countries in the world. But despite that, there is
always the desire of entrepreneurs, operate as low as possible tax rates. To fi nd out which tax rate puts them in a big burden, according to interviewed entrepreneurs, the majority of entrepreneurs (58%) want to reduce their income tax. 25% of entrepreneurs want to reduce Value Added Tax (VAT). The next position shows the reduction of excise tax rate (7%). This is followed by a reduction in the profit tax rate (5%). In the last positions are import (3%) and property tax rates (2%).
The following problems are the main impediments and problems to the development
of entrepreneurship: A) Difficult access to credit resources (35%); B) Market insecurity
from counterfeit products (25%); C) Insecurity of business interests by the government
(20%); D) High tax rates (20%); The tax system in Georgia and its evaluation by
entrepreneurs, what kind of difficulties do they have in this regard, this study identified
the following circumstances: 58% of entrepreneurs think that some legislative records are
vague and do not provide an accurate explanation; While 27% of entrepreneurs think that
the weakness of the tax system is instability;10% think the changes are only for large
firms; 5% of entrepreneurs believe that the tax system deficiency is a few of the reasons
mentioned above.
Given the above, it is clear that despite a number of positive impacts of tax reform,
entrepreneurs still face certain barriers and problems. Therefore, when developing
economic reforms it is desirable that the problems/barriers of entrepreneurs be taken into
account by the government, in order to improve the entrepreneurial environment.
Description
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www.parliament.ge
www.rs.ge
Keywords
Entrepreneurship, tax system, taxes, tax reforms
Citation
Economics and Business, №3, 2019, pp. 93-100