The government gives the green light to the tax evasion by keeping silence – the tobacco smuggling is at an all-time high
The cigarette smuggling is on the rise in this country, the businesses and the budget suffer losses, the weak actions of the relevant structures and the state resources are not enough to prevent it. Such is the situation on the cigarette market in Georgia today. The tobacco industry says the situation has changed especially since the excise tax has been increased sharply. It was said at the time that the reason for this was the accumulation of more funds in the state budget, although as a result both the state and the private companies got the opposite. Private businesses were affected and the state budget also loses millions of GEL. Illegal businesses in the regions of Georgia are protected by influential patrons. It seems that the government gets back the Shevardnadze-era Ergneti smuggling market. This time, near the occupied Abkhazia. Today, Samegrelo is full of the cigarettes smuggled in from Abkhazia. According to locals, certain individuals are able to smuggle excise-free cigarettes from the occupied Abkhazia without any problems. According to them, if the so-called border is closed, they can do it going through bypass roads and the river.
Beyond the river of Enguri the smuggling is protected by the Abkhaz law enforcement officers or the criminal authorities. The cargo is carried on the territory controlled by Georgia. Zugdidi Sakrebulo Deputy Chairman says that he is not interested in smuggling because he is not a smoker. In the surveillance service, which is supposed to check the situation in the city streets, they say that they have heard nothing about the smuggled cigarettes being sold. At the same time, a criminal showdown took place at the occupation line. The young man has both knees shot.
The showdown is reportedly linked to the cigarette smuggling, which is controlled by criminal leaders in Abkhazia and Samegrelo. According to one of the versions, the executor of their task, is Dato Shengelia, leader of the so-called Forest Brothers group, while according to the other version, on the contrary, Shengelia and his entourage represen the affected party. In Samegrelo, at the beginning of July, late at night, two bullets were fired at Khuta Buliskiria. It was reported that he was shot by Dato Shengelia, who oversees the smuggling business in Samegrelo and is close to the criminals. Presumably, the conflict is also related to this business. The opposition speaks about the increase in smuggling and the activities of the criminals in Samegrelo. The opponents of the ruling team say that the practice of shooting in the knees is a signature of the criminal world. The facts of the increased crime and smuggling in Samegrelo are probably related to the government. Racketeers and criminal gangs receive protection and guarantees from the ruling team in exchange for assisting the government. According to local residents, the tobacco enters from the occupied Abkhazia through the Georgian police checkpoints. According to the available information, this business is protected by high-ranking officials of the Ministry of Internal Affairs. Last year, the journalistic investigation revealed that the cigarettes with the Abkhazian excise were sold by the family members of Jumber Izoria, the head of the Chkhorotsku police department. Izoria then resigned.
Recently, Tsalenjikha Municipality Sakrebulo Chairman Temur Gvinjilia and an employee of the Sakrebulo staff were arrested for the cigarette smuggling. According to the Investigation Service of the Ministry of Finance, 8 310 packs of the excise-free cigarettes with an estimated value of more than 34 000 GEL were seized during the search.
Tsalenjikha District Court sentenced Temur Gvinjilia and the employee of Sakrebulo staff to imprisonment as a preventive measure. The offense is punishable by the imprisonment for a term from six to eight years. Large importers of the tobacco confirm that the situation in the regions is dire and the volume of smuggling is growing at a record rate.
According to the National Statistics Office, the import of tobacco and all tobacco raw materials in Georgia has almost halved compared to the previous years. Experts suggested that the increase in excise duty would increase the market share of smuggled cigarettes. According to them, they warned the authorities about this when it became known at what rate the excise tax on tobacco would increase.
“It is impossible not to run the risks of smuggling, when in one of the neighboring countries a pack of cigarettes is cheaper and it is sold for about 1 GEL. Unfortunately, we are sure that there will be more such facts. How well the relevant agencies will deal with this challenge is another issue, but the fact is that today we are facing this challenge,” - said the analysts.
Economists still say that the smuggling risks will be high in the near future, as it is not a simple problem, and it will still be difficult for the government to deal with it, no matter how much border control increases.
For reference, according to the years, the statistics of the issuance of excise stamps are as follows: 2017 -local production 86 903 000, imported 310 264 210, total 397 167 210; 2018 - local production 108971000, imported 275173600, total 384 144 600; 2019 - local production 2 511 000, imported 211 808 800, total 214 31 9 800; 2020 - 6 months - local production 20 761 000, imported 111 067 000, total 130 828 000.
These statistics show that as a result of the existing regulations and the increase of the excise duty, the forecast volume of the excise duty in the budget has decreased at a record rate. At the same time, the forced shutdown of a large company such as the tobacco factory under Omega Group further affected the budget revenues and led to a significant decline in the legal market for tobacco products. The government is silent about the smuggling of cigarettes, the non-competitive environment in the market and gives the green light to the tax evasion by keeping silence.