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Secrete Scheme of Vano Chkhartishvili’s Cigarette Business

According to the Kviris Palitra newspaper, tobacco business uses a secrete scheme to sell filtered cigarettes as unfiltered cigarettes and to hide tens of millions of GEL from the state budget every year.

„On January 1, 2017 the price of cigarettes in Georgia rose for the 5th time over the past 5 years. At this stage, the excise price of one pack of filtered cigarette rose by 60 Tetri. The excise tax on one pack of unfiltered cigarette increased by 30 Tetri. In whole, today the excise ratio in the price of unfiltered cigarette is 60 TeTri and in filtered cigarette – 1.70 GEL. The difference is evident – 1.10 GEL per pack! There were several reasons for growth in cigarette excise tax, including, higher tariffs were to reduce the smoking level in the country. Moreover, under international agreements, Georgia is obliged to strengthen control over tobacco consumption and increase tax incomes in the state budget through higher excise tax.

It is interesting how the excise tax growth has affected the tobacco market. It turned out that consumption of imported filtered cigarette declined, but production of domestic unfiltered cigarette increased, despite its selling price has considerably increased. At a glance, smokers have given preference to unfiltered domestic cigarette in response to growing excise tax and prices on cigarettes. However, we have not found even one person smoking unfiltered cigarette….

One excise mark issued by Ministry of Finance signifies one pack of cigarette and the Ministry information comprises interesting issues. Namely, in 2014-2015 production of filtered cigarette exceeded production of unfiltered cigarette twice. In 2016 changes took place in cigarette production and the ratio of unfiltered cigarette grows quickly. In 2017 the situation radically changed along with significant growth in excise tax. The production of unfiltered cigarette has increased in unprecedented scales.  In 2018 domestic production of filtered cigarette has nearly ceased. What has happened?

Since the official indicators comprised nothing more, we visited several booths of cigarettes and asked for full assortment of domestic cigaretteს. And here we disclosed the Formula of Success of domestic tobacco manufacturers that has determined the behaviour of tobacco manufacturers. It turned out that when buying a pack of the so-called unfiltered cigarette of domestic production, smokers also get 20 units of ‘filters’. These filters accompany each pack of unfiltered cigarettes. Even international tobacco manufacturers would envy such an ‘innovative’ solution! At a glance, nothing makes unfiltered cigarette different from filtered cigarette, but it is enough to turn out the piece of cigarette and you will see an empty space, where the accompanying filters should be placed. In short, you can transform an unfiltered cigarette into filtered cigarette by one touch.

Is this a certain trick for tax evasion, dishonest conduct on the market and anything else? All these circumstances should be clarified by investigating instances, The fact is that in this way tobacco business sells filtered cigarettes as unfiltered cigarettes and hides tens of millions of GEL from the state budget every year.

Supposedly, this circumstance has become a ground for imposing 26 million GEL fine on Tbilisi Tobacco after the former Finance Minister calculated the difference between excise tax prices of filtered and unfiltered cigarettes.

It should be noted that Okuashvili’s OGT cigarette is also sold in this way and the same filters accompany it as Pirveli cigarette of Tbilisi Tobacco.

Distributors assert that the selling price of such tobacco is 1-1.5 GEL lower compared to imported products and they have a lot of clients. This is a commercial secrete of domestic tobacco manufacturers that has increased demand for their unfiltered cigarettes.

It is interesting why the Government turns a blind eye to all these facts and why it refuses incomes of multimillions of USD? If we trust the mentioned audio record, which was unveiled several days ago, Irakli Chubinishvili, a stakeholder of Georgian Tobacco, and Omega Group founder Zaza Okuashvili talk about 26 million GEL, which ex Finance Minister Dimitri Kumsishvili planned to impose on tobacco manufacturers, but by instruction of former Prime Minister Bidzina Ivanishvili, this process was ceased.  Seemigly,  the Authorities cheat themselves. According to the records, Vano Chkhartishvili has managed to evade payment of 26 million GEL. Tobacco manufacturers successfully continue applying legal gaps and selling filtered cigarettes are unfiltered products.

However, the most alarming is that there are people (in this case Chkhartishvili), who can racket the Authorities and hide huge amount of money from the state budget, the Kviris Palitra writes.

Article by Kviris Palitra