How to overcome the barriers for enterpreneural activity in Georgia

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
Ivane Javakhishvili Tbilisi State University Press
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.
 ერქომაიშვილი გ. (2016). საქართველოს განვითარების ეკონომიკური პოლიტიკის პრიორიტეტული მიმართულებები. თბილისი.  საქართველოს პარლამენტი. (2010). საქართველოს საგადასახადო კოდექსი 2019 წლის 25 მაისის მდგომარეობით.  საქართველოს პარლამენტი. (2010). საქართველოს საგადასახადო კოდექსი 2011 წლის 12 მარტის მდგომარეობით.      Erkomaishvili G. (2016). Sakartvelos ganvitarebis ekonomikuri politikis prioritetuli mimartulebebi. Tbilisi. [Priority Directions of Economic Development Policy of Georgia ] (in Georgian).  Saqartvelos parlamenti (2010). Sakartvelos sagadasaxado kodeqsi 2019 clis 25 maisis mdgomareobit. [The Parliament of Georgia. Tax Code of Georgia for May 25, 201.] (in Georgian).  Saqartvelos parlamenti (2010). Sakartvelos sagadasaxado kodeqsi 2011 wlis 12 martis mdgomareobit. [The Parliament of Georgia. Tax Code of Georgia as of March 12, 2011.](in Georgian).    
Entrepreneurship, tax system, taxes, tax reforms
Economics and Business, №3, 2019, pp. 93-100