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Tobacco and Beer Companies Plan to Cut Staff due to Excise Tax Increase

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.