Tobacco and beer industry predicts a decrease in production due to the planned increase of excise tax. Vasiko Sulkhanishvili, Director General of the JSC Georgian Beer Company – Zedazeni , says that a 50 percent growth in the excise tax on beer will cause many negative processes in the sector.
From the first of January 2015, an excise tax rate for malt beer, ethyl alcohol and alcoholic beverages is planned to increase.
In particular, if the government does not reducee tax rate, the production may be reduced, which will automatically decrease the number of employed people.
Natakhtari’s Director of Corporate Affairs Nikoloz Khundzakishvili also predicts a drop in the company’s production.
In his words, due to the increased excise tax, the market will reduce by at least 20 percent.
In addition, he suggests that the price of the product will increase, the market will reduce due to elasticity, which means that production should be reduced, thus the number of workers employed in the company will reduce as well.
Khundzakishvili thinks that the excise tax rate change is difficult, because it has been provided in the State budget, as a result, a yesterday meeting with the business ombudsman was only of a preventive character.
According to him, the position of the beer manufacturers has always been clear for the business ombudsman , but the businessmen once again announced that such decisions should not be taken without consulting business.
Khundzakishvili believes that the government’s decision to increase an excise tax on cigarettes and beer is irrelevant and disproportionate.
He says that the cigarette distributors knew about the planned increase but it was a shock for beer manufacturers.
Tobacco importers say that an increase in excise tax on cigarettes will hike the price of cigarettes.
An excise tax rate on tobacco products, as well as, malt beer, ethyl alcohol and alcoholic beverages is to increase from January 1, 2015.
With the initiative of the Government of Georgia, the Ministry of Finance of Georgia prepared a bill according to which the excise tax on one package of filtered cigarettes will be increased by 15 tetri and by five tetri on non-filtered cigarettes. In addition, according to the bill, the so-called mixed system will be enacted from 1 July 2015. According to this new mechanism, the excise duty on one package of filtered or non-filtered cigarettes (20 cigarettes in each) will be the sum of the excise tax as determined by the Tax Code of Georgia and 5% of the retail price.