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Paata Bairakhtari
Photo/ RFE/RL

Today Small Business is Not Able to Make Reinvestments: AYFB

New tax preferences for small business sector will come into force on July 1. The government’s initiative calls for cutting the turnover tax for small business  5 times. As a result, companies with 500 000 GEL turnover will move to the category of small business.

YFB vice president Paata Bairakhtari hails the initiative, but he also outlines risks that may arise.

“Small and medium business is a backbone of state economy in developed countries. But we have opposite situation – small and medium business in the gravest situation. For example, medium business employs 4 times less people, than the major business. Last year we introduced Estonian Model of profit tax and, in practice, only major business has gained benefits from it, because today small business is not able to make reinvestments. Deficit arisen after introduction of the mentioned model was covered by small business and ordinary citizens. Unlike Estonian model, the mentioned initiative is directed to development of small business, because the small business will be able to save financial resources, on the one hand, and protect itself from bureaucratic barriers, on the other hand. However, the mentioned tax preferences also comprise certain risks. For example, nobody talks  about how the budget deficit will be balanced after enactment of the mentioned law. Nobody says whether this deficit will  be balanced by ordinary citizens, as this happened in case of Estonian Model. These issues comprise serious risks and require valuable calculation and analysis. Otherwise, serious threats may arise in the country”, Bairakhtari noted.