BAG: Taxation model currently in force on imports of Liquefied Petroleum Gas in Georgia poses significant risks
26 Feb '20
Taxation model currently in force on imports of Liquefied Petroleum Gas (LPG) in Georgia poses significant risks in terms of fiscal administration and creates a non-competitive environment for conscientious entrepreneurs - states Shavleg Mishveladze, Head of BAG's Oil, Petroleum and Gas Committee.
A two-stage taxation model is applied on imports of liquefied petroleum gas (LPG) in Georgia - 120 GEL per ton is payable at the moment of customs clearance of goods, and extra 180 GEL is payable when supplying liquefied petroleum gas to LPG delivery trucks.
Based on our observation, it is clear that there are substantial problems in terms of administration at the second stage of taxation - in other words - the extra 180 GEL is not completely transferred to the state budget. Only two of the large oil companies supply liquefied petroleum gas to the market - though only through a few stations. And the rest of the market share covers small filling stations and delivery points scattered around in different directions, where, without any exaggeration, the situation is completely chaotic. An outdated tax system adjusted to the reality of past years has now clearly become unjust. In addition, there is a poor administration practice in this regard that eventually creates an unequal, non-competitive environment for conscientious taxpayers. As a result: Conscientious entrepreneurs are almost no longer operating in this market as there is no economic benefit for them in the given situation. This segment of the market, as already mentioned, is filled with different types of delivery points, regarding which certain questions have raised.
Another matter of discussion is an obviously increased number of LPG filling stations everywhere (including the capital) - by the way, according to our information, most of them are arranged without permission. It is even apparent to the naked eye that most of them are far from adhering to even the most basic conditions of technological perfection and safety standards. However, this is only a small part of the problem in this regard; the key and major issue is to put all entrepreneurs in the same, equal market environment, which is a fundamental prerequisite for starting and producing any business. It's also worth noting that business can be launched with small budget investments in this field (of course by ignoring permits and safety conditions), which, under conditions of the outdated legislative framework and weak administration, results in unpaid millions in budget and distorted images of cities.
Because of the foregoing, it is our responsibility to come up with professional, argumentative and constructive initiatives ensuring that each Tetri is transferred to the state budget and establishing rules for doing fair business in this area.
It should also be noted that our views are fully in line with the views of the agencies responsible for establishing and further adhering to the rules of the competitive environment in this field, and we, therefore, believe that the above issues can be resolved within the short term.