Levan Agdgomelashvili: “Interests of local businesses must be considered if we are to achieve the desired effect!”
The latest broadcast of “Business Contact” by Maestro TV was dedicated to the discussion of the results of the first quarter of the 10-point GEL stabilization plan and featured Levan Agdgomelashvili, General Manager of Omega Group Tobacco, as a guest. According to him, announcement of excise tax increases gave rise to significant fears of price growth among the population.
“The people thought that retail prices would grow by at least 0.6 GELand the ad valorem rates would double. Had the tax growth been adequately reflected, the prices would have grown far more significantly due to VAT difference alone, but that never happened; the prices did not grow as much as even the consumers feared,” - said Mr. Agdgomelashvili, claiming that this may have been caused either by some companies refusing to increase prices even at their own expense or by sale of certain products at prices below production value:
“In case a company refuses to increase prices at the cost of losing profits, this is directly tied to revenue tax exemption. The plan for fast development of the country’s economy did include partial abolition of revenue tax, but when a company deliberately reduces its profits, the overall effect remains the same: it does not matter a business reduces profits by paying taxes or refuses to adjust its prices to reflect taxation adequately. Still, the idea of limiting revenue tax is a welcome one, as liberated sums will amount to approximately 500 million that will be used for expansion of local businesses, as our Prime Minister had said.”
The General Manager of Omega Group Tobacco also addressed the issue of so-called predatory pricing, saying that some international companies manage to sell their products in Georgia at prices far below their respective cost.
“Given such circumstances, reduction or even total abolition of revenue tax in favor of increasing excise taxation will not make the intended impact. The country’s economy relies first and foremost on local business and if it remains shackled and squeezed in between large players who have no qualms with using dishonest methods, this will not help us achieve the desired effect. Therefore, I think that different other measures need to be taken,” - said Agdgomelashvili, adding that it would be good if money liberated by revenue tax reduction remains in the commercial sector and aids in expansion of businesses.
“Georgia has signed the Association Agreement with the European Union, and yet many people say that it completely lacks legislation to combat undercutting. This does not mean, however, that companies that suffered from undercutting do not have the right to demand compensation. In the end, it boils down to the principle of fairness – if a company experiences damage due to another company’s actions, it is fully within its right to demand compensation, and lack of appropriate legislation does not release the culprit from responsibility, either,” - declared Mr. Agdgomelashvili, expressing a desire for Competition Agency’s activity to be more effective.
To the anchor’s question regarding whether the government’s 10-point plan accurately reflects the challenges currently faced by Georgian business, he replied with the following:
“It’s acceptable and correct as a starting measure, but in order to achieve the desired effect, more complex measures need to be implemented, interests of local businesses need to be taken into account and a competitive environment needs to be created.”
According to Mr. Agdgomelashvili, recent investments made by Omega Group do not solely owe to partial abolition of revenue tax.
“We have been investing for years,” - he said.
It is noteworthy that Zaza Okuashvili, founder of Omega Group and member of the Adjarian Supreme Council, in 2016 was named the Largest Investor of the Year by Georgian Times media holding and international research organization GORBI.