Supporting tax policy for small business in Georgia

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Date
2019
Journal Title
Journal ISSN
Volume Title
Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
There are a number of stimulating actions in the direction of tax policy for entrepreneurs who have an entrepreneurial and especially small business status in Georgia. The status of small business in Georgia was determined by Tax Code and entered into force on 01 January 2011 in order to take advantage of certain preferences for taxpayers who had a relatively low level of income. However, it is noteworthy that after the introduction of the status additional amendment has been made in favor of taxpayers in 2018. However, in this regard we can say that the state budget has lost its revenues and there are also some risk factors that could further reduce the state revenues. On July 1, 2018, the amendment has been made into the Tax Code and the joint revenue margin has increased from 100 000 GEL to 500 000 GEL. While taxable income is taxed by 1% instead of 5%, however, the rate is changed to 3% if its joint income from economic activity exceeds 500,000 GEL. There are about 120 000 entrepreneurs who have small business status in Georgia, therefore, it is important to encourage these taxpayers with different benefits, because quantitative terms are relatively voluminous. As for the risk factors that can be identified after this legislative amendment and that could additionally reduce the tax revenue within income tax, here lies the following: in the field of service, e.g. in a construction business, persons employed in a repair service, they can be granted the status of small business, which does not include the list of prohibited activities, and the employer (in this case the construction company) will no longer be taxed with income tax, instead of 20% (income tax) will be taxed by 1% (small business status). Therefore, we can conclude, it is a big risk that the budget will likely receive less income taxes than it is planned. We can also consider the lack of information as a risk factor, taxpayers with small business status have the right not to indicate the information on the balance, as well as the price tag, etc. Based on the fact that it is an informative character and is not obliged to fill the fields, which in turn will complicate the collection of information about taxpayers (within the scope of small business status) for the Revenue Service and to monitor it accordingly. However, the above-mentioned risk factor (which can affect the tax on income) should be an object of observation in dynamics, since the expected income having been already reduced in the budget, would not be decreased even more.
Description
1. საქართველოს საგადასახადო კოდექსი, თბილისი, 2010. 2011 წლის 12 მარტის მდგომარეობით. 2. საქართველოს საგადასახადო კოდექსი, თბილისი, 2010. 2018 წლის 07 დეკემბრის მდგომარეობით. 3. საქართველოს მთავრობის 2010 წლის 29 დეკემბრის №415 დადგენილება „სპეციალური დაბეგვრის რეჟიმების შესახებ“ 4. www.rs.ge – შემოსავლების სამსახური 5. hp://eugeorgia.info/ka/ – Europe for Georgia 6. www.parliament.ge – საქართველოს პარლამენტი
Keywords
Small Business; Tax Policy; Budget; Tax Legislation
Citation
Economics and Business, №1, 2019, pp. 122-126
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