The Association of Banks of Georgia considers unacceptable the introduction of deposit tax levy, at least in the coming years, as such a decision would lead to an increase in interest on loans and a further decline in the economy.
The opinion on the necessity of deposit tax levy was made by a number of experts who believe that the placement of citizens’ savings in bank deposits inhibits the development of other sectors of the economy.
However, they argue that in many countries, including developed, dividends from deposits are taxable, as well as other sources of income.
According to George Tsutskiridze, the Executive Director of the Association of Banks of Georgia, talks about the possibility of deposit tax levy are not illogical, and the Association does not oppose such an initiative unequivocally and irreversibly.
“This issue is quite possible to discuss, but there is just one shag – any law or regulation must correspond to the situation in the country. When the government decided to release deposits from taxes, in Georgia there was virtually no economy, and that which existed was largely in the shade. There is another very important factor – 85% of the money supply that exists in the country, circulated outside the banking system. 10 years ago the total amount of deposits in the country amounted to GEL 960 million, including term deposits – GEL 450 million. Then as today they amount to 12 billion, including term deposits worth 7. 4 billion. Deposits are a major source of funds for lending – today credit portfolio of the banking system amounts to GEL 14 billion, which is 14 times more than 10 years ago. However, even in the current situation the volume of deposits in banks makes 31% of GDP, whereas in developed countries – more than 100%, “- he notes.
He believes that before taking the European regulations, it should be considered that in Europe, which is a homeland of banks, the first banks appeared in the 15th century.
“Based on this, I think it is extremely arrogant opinion that in the current situation the deposit tax levy will contribute to the development of individual sectors of the economy. Everything will be vice versa. There is a very high degree of probability that the taxation of deposits will lead to an increase in interest on loans, and eventually the economy will decline even more. In developed countries, free capital goes to the financial market, and the fact that in Georgia it doesn’t happen do not , of course, is a problem. But it cannot be solved by levying taxes on deposits, “- the banker notes.
Besides, in his words, the outflow of funds from financial institutions will lead to the fact that the released funds will be used not in other sectors of the economy, and will go back to where they were 15 years ago –to their owners.
“The European banking system has taken the present appearance not due to any specific legislative initiatives but due to historical regularities and modernization of the financial system. Any economic policy should be aimed at resolving the problems, not at the black PR against the banking system. Now banks are blamed in all of the country’s economic woes, and all and sundry accuse banks of “speculation” , the collapse of the national currency, the artificial devaluation, even sabotage. Some media speculate on this topic. Despite the fact that the banking system is the foundation of the economy, and a successful banking system can be only in a successful country, “- George Tsutskiridze adds.