Download Tax revenue performance

Georgian Economy Overview
June 2009
www.mof.ge
Economic Growth
GDP
Nominal GDP (US$bn)
14
12
10
8
6
4
2
0
11.1%
9.6%
9.4%
5.9%
5.1
4.0
2003
2004
Real GDP annual percent change
Real GDP growth, y-o-y (%)
12.4%
2.1%
7.8
6.1
2005
2006
12.6
8.5%
10.2
6.4
12.8
2007
-1.5%
14%
12%
10%
8%
6%
4%
2%
0%
-2%
-4%
1H 2008F 2009F
2008
Source: Department of Statistics of Georgia, Ministry of Finance of Georgia
Components of nominal GDP (2008)
Agriculture, 8.9%
Manufacturing,
8.2%
Construction,
5.3%
Other, 29.0%
2008
2009
World Economy
3.2
-1.3
US
1.1
-2.8
UK
0.7
-4.1
EU Area
0.9
-4.2
-0.6
-6.2
EU
1.1
-4.0
Other advanced economies
1.6
-4.1
Central and Eastern Europe
2.9
-3.7
CIS
5.5
-5.1
Developing Asia
7.7
4.8
China
9.0
6.5
India
7.3
4.5
Middle East
5.9
2.5
Africa
5.2
2.0
Western Hemisphere
4.2
-1.5
Georgia
2.1
-1.5
Japan
Transportation &
Communications,
10.0%
Financial
Intermediation,
2.1%
Public
Administration,
14.9%
Trade, 13.9%
Healthcare &
Education, 7.6%
Nominal 2008 GDP is US$12,797 mln
Source: Department of Statistics of Georgia
www.mof.ge
Source: International Monetary Fund
Georgian Economy Overview
June 2009
1
Current Account Deficit
Current account deficit
CAD
5,000
Total private capital inflows (TPCI)
Donor Inflows (DI)*
CAD as % of GDP
CAD + TPCI + DI as % of GDP
30%
4,000
US$ mln
2,000
1,000
0
-1,000
20%
942.0
3,000
5.6%
1.7%
98.3
351.0
-383.3
160.3
479.6
-353.6
-9.6%
-6.9%
-2,000
3.1%
176.7
734.8
-709.5
-11.1%
7.7%
261.7
1,506.8
-1,174.6
276.2
5.4%
2,283.8
-2,008.7
-19.7%
-4,000
2004
2005
850.0
1,300.0
0.1%
2,905.0
-2,850.5
-15.1%
-3,000
2003
7.8%
2006
2007
10%
0%
-2,134.0
-10%
-16.3%
-20%
-22.3%
-30%
2008
2009F
Note: Updated as of 10 April 2009
*Donor inflows include both public and private sectors. Donor inflows in 2009 is adjusted according to the banking sector foreign debt outflows
Source: National Bank of Georgia , Minister of Finance of Georgia
Exports and imports**
Imports of goods & services
CAGR (‘04-‘09F): 16%
8,000
Exports of goods & services
7,497.0
6,000
US$ mln
Remittances
CAGR (‘04-‘09F): 10%
5,916.9
4,000
2,000
0
4,412.9
1,865.3
165.8
1,288.5
2,492.8
212.7
1,646.9
2003
2004
3,318.1
315.4
2,187.5
2005
755.4
955.2
730.0
420.5
2,551.6
2006
3,182.4
2007
5,247.9
3,691.3
2,583.9
2008
2009F
**Export & import of goods and services
Source: National Bank of Georgia
www.georgia.gov.ge
Georgian Economy Overview
May 2009
2
Diversified Trade Structure
 WTO member since
2000
 Simplified customs
regime since August
2006, new customs
code became effective
in 2007 and was
upgraded in 2009
Import structure* by country, 2008
Export structure* by country, 2008
China, 0.7%
Russia, 1.9%
Kazakhstan,
1.3%
Kazakhstan,
1.1%
Other, 6.0%
EU Countries,
25.8%
China, 5.0%
Azerbaijan,
14.2%
 Share of EU in exports
up to 26% from 17% in
2003
 Georgia Turkey FTA
was signed in 2008
United Arab
Emirates,
4.8%
Russia, 6.7%
Turkey, 19.5%
Armenia,
7.2%
 One of the two
beneficiaries of the EU
GSP+ Scheme in the CIS
since 2006, granting
local companies the
right to export 7,200
categories of goods
duty-free
EU Countries,
28.5%
USA, 4.1%
Ukraine, 7.6%
 Zero tariff on the
majority of goods
Others,
10.4%
Turkmenistan,
2.8%
United Arab
Emirates,
0.8%
Canada, 8.7%
 No quantitative
restrictions on trade
Armenia,
1.2%
USA, 7.2%
Import structure* by product, 2008
Export structure* by product, 2008
Pharmaceuticals, 1.3%
Oil & Gas, 3.3%
Cement, 5.6%
Vessels &
Aircraft, 0.3%
Gems &
Precious
Stones, 6.5%
Ferrous Metal
Products,
2.7%
Others, 16.3%
Vehicles, 7.6%
Paper, 1.6%
Sugar, 1.1%
Pharmaceuticals,
3.3%
Others, 39.2%
Cereals, 3.3%
Fertilizers,
6.7%
Ferrous
Metals, 31.2%
Coppers &
Gold, 8.8%
Source: Department of Statistics of Georgia
* Export & import of goods only
www.georgia.gov.ge
Plastic, 2.8%
Ferrous
Metals, 4.1%
Sugar, 0.5%
Beverages,
Spirits &
Vinegar, 7.7%
Azerbaijan,
10.2%
Ukraine,
10.7%
Source: Department of Statistics of Georgia
Source: Department of Statistics of Georgia
Equipment &
Rail Cars, 3.9%
Turkey,
14.9%
Georgian Economy Overview
Vehicles,
12.2%
Mechanical
Equipment &
Electrical
Machinery,
20.1%
Oil & Gas,
18.3%
Source: Department of Statistics of Georgia
May 2009
3
Investment Inflows
• Georgia has bilateral treaties on investment promotion and protection with 25 countries
Net FDI breakdown by origin
Net FDI
2004-2008
US$ mln
UK
Turkey
USA
Netherlands
Kazakhstan
UAE
British Virgin Islands
Cyprus
Bahamas
Czech Republic
Subtotal
Other
Total
%
577.0
501.5
491.6
456.5
405.3
395.6
313.9
252.3
246.4
213.8
3,853.9
1,593.9
5,447.8
Source: Department of Statistics of Georgia
10.6%
9.2%
9.0%
8.4%
7.4%
7.3%
5.8%
4.6%
4.5%
3.9%
70.7%
29.3%
100.0%
Cumulative Net FDI
Cumulative Net FDI, '04-'08
6,000
US$ mln
4,000
28%
30%
3,000
2,000
5,447.8
10%
15%
4,154.1
499.1
948.9
2004
2005
19.8%
2,000
20%
15.3%
1,500
15%
9.7%
1,000
2,014.8
7.0%
0
499.1
449.8
2004
2005
2007
Source: National Bank of Georgia, International Monetary Fund
www.georgia.gov.ge
8.4%
10%
1,100.0
5%
0
0%
2006
2007
2008
2009F
Source: Department of Statistics of Georgia
Agriculture, 0.8%
Other, 3.2%
Transports &
Communications,
23.6%
Banking, 4.5%
Construction,
14.6%
Energy, 18.6%
Manufacturing,
16.8%
0%
2006
1,293.7
1,190.4
500
10.1%
20%
10%
2,139.3
1,000
25%
Net FDI breakdown by sectors (2007 – 2008)
Cumulative Net FDI as % of GDP
50%
43%
41%
40%
5,000
Net FDI as % of GDP
2,500
US$ bn
Country
Net FDI
Services, 17.8%
2008
Source: Department of Statistics of Georgia
Georgian Economy Overview
May 2009
4
Fiscal and Monetary Performance
Tax revenue performance
(GEL mln)
Fiscal revenue
Fiscal revenue as % of GDP
7,000
6,000
5,000
21.8%
23.3%
Exchange rate evolution
25.6%
29.3%
24.4%
30%
GEL mln
2,000
1,975
2,673
3,528
4,973
5,791
5,305
10%
2006
1.83
1.8
2.0
2007
Source: Ministry of Finance of Georgia
1.49
1.67
1.71
15%
0%
2005
1.6
2.08
5%
0
2004
GEL/US$ (e-o-p)
1.59
25%
20%
3,000
GEL/US$ (period average)
35%
29.9%
4,000
1,000
1.4
1.79
1.81
1.78
2005
2006
1.67
1.66
2007
2008
1.67
1.91
2.15
2.2
2008E 2009F
2003
2004
Q1 2009
Source: National Bank of Georgia
Consumer price index (y-o-y)
CPI (e-o-p)
14%
CPI (period average)
12%
11.0%
10%
8%
7.0%
6%
4.8%
7.5%
8.2%
7.8%
8.8% 9.2%
5.5%
6.2%
5.7%
10.1%
9.2%
4%
1.6%
2%
0%
2003
2004
2005
2006
2007
2008
Q1 2009
Source: National Bank of Georgia
www.georgia.gov.ge
Georgian Economy Overview
May 2009
5
Monetary Performance
NBG’s Gross FX Reserves
2,500
US$ mln
2,000
1,500
1,000
500
0
Source: National Bank of Georgia
NBG Interventions
Monthly TICEX trading volume
300
200
225
US$ mln
191
100
0
55
2
75
101 93
141 124
116 121 129
99 102
99
-52 -93 -76 -86 -84 -71 -97 -91 -107
-100
In 4m ‘09 gross FX
reserves declined
by US$ 85 mln only
NBG's monthly net interventions
262
179
145
139
84
-5
70
-147 -176
219
240
114
-54 -84 -47
187
232
207
178
209 178
170 116 82 124
106
57 74
0
-3
-200
Source: National Bank of Georgia
www.mof.ge
Georgian Economy Overview
June 2009
6
The Donors’ Pledges of US$4.5 billion
Aid by donors
Donor
Aid by sectors
US$ million
World Bank
530
EBRD
927
Asian Development Bank
Sector
US$ million
IDPs support; e.g. IDPs housing
350
300
Transport infrastructure
682
IFC
350
Energy infrastructure
381
European Investment Bank
330
Urban and municipal infrastructure
210
USA
1,000
EC
638
EU members
174
Japan
200
Other states
88
Total
4,535
Source: World Bank, European Commission
Finance and banking
1,105
Non- sectoral support
586
Unallocated
1,221
Total
4,535
Source: World Bank, European Commission
• As of 1 May 2009, Georgia has already entered into agreements for or received 38.2% (US$1,731.2 million, 13.4% of
2009 forecast GDP) of the total donors pledge to private and public sectors
• Additional projects have already been indentified and agreements have been reached on the amount of US$1,879.4
million (41.4% of total pledge, 14.6% of 2009 forecast GDP) to be formally committed in 2009
• Government of Georgia has been working and negotiating the terms and conditions on the remaining amount of
US$924.4 million, 20.4% of total pledged amount
www.georgia.gov.ge
Georgian Economy Overview
May 2009
7
The Donors’ Pledges of US$4.5 billion, cont’d
Implementation of the pledge made at Committed
Actual
Actual
To be formally
o/w
o/w
To be
the international donors'
amount as of 30 disbursements
disbursements committed in
disbursed disbursed in
received in
conference for Georgia (Brussels, 22
April ‘09 (US$ as of 30 April ‘09
/Committed
2009
in 2008
2009
2009
October 2008)
mln)
(US$ mln)
amount (%)
(pipeline)
Pubic sector
Loans
349.6
122.6
107.8
14.8
35.1%
1,022.5
340.2
Grants
528.4
302.3
295.1
7.2
57.2%
506.8
188.7
Total public sector
878.0
424.9
402.9
22.0
48.4%
1,529.3
528.9
Private sector
Total public and private
853.1
343.5
203.8
139.7
40.3%
350.0
350.0
1,731.2
768.4
606.7
161.7
44.4%
1,879.4
879.0
Source: Ministry of Finance of Georgia
Examples of Infrastructure Projects:
• 500 kv. Power Transmission Line (EBRD, EIB, KfW)
• East-West Highway Improvement Project (WB, Japan)
• Adjara Bypass Road (ADB)
• Vaziani-Gombori-Telavi Road (WB)
• South Georgia Road (MCG)
• Secondary and Local Roads (WB)
• Rehabilitation of Communal Infrastructure Facilities in Batumi (KfW)
• Regional and Municipal Infrastructure Development Projects (ADB, EBRD)
Georgian Economy Overview
May 2009
8
Economy’s Stimulus Package - GEL 2.2 bn, Social Package - GEL1.6 bn
State Budget, GEL mln (including donors financing through budget)
520
• Main roads (road dept.)
180
• Other roads (MCG, MDF)
120
• Water utilities
150
• Regional projects
140
• IDP housing
80
• Educational infrastructure
30
• Irrigation, river border construction
230
• Other
Subtotal
1,450
Tax decrease
250
Donor financing, outside of budget
500
Grand total
2,200
Current Budget Supplement
312
Source: Ministry of Finance of Georgia
www.mof.ge
Georgian Economy Overview
June 2009
9
Budget Supplement
State Budget'09 Supplement
million GEL
Budget Outlays
MDF
MCC
Tbilisi
Regional Fund
Ministry of Health
Ministry of Agriculture
Ministry of IDPs
Ministry of Defense
Administrative costs
Other costs
www.mof.ge
312
115
86
69
37
39
25
16
-45
-20
-67
Resources
Tax revenues
Personal Income Tax
Corporate Income Tax
VAT
Excise
Customs tax
Grants
Dividends
Privatization
Financial assets decline
Concessional loans
T-Bills
June 2009
-500
-25
-83
-314
-68
-9
111
60
135
52
238
260
Robust Banking Sector
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Dhabi Group
 Georgia’s banking sector represents only a moderate contingent liability of the sovereign
 Entirely privately owned since 1996
 No restrictions on foreign ownership of banks
 Well capitalised with average BIS capital adequacy ratio of 19%
www.georgia.gov.ge
Georgian Economy Overview
May 2009
11
Banking Sector Resilient
Capital Adequacy Ratio (CAR)
NPL to total loans
FSA requirements
Actual - Based on IMF's methodology
25%
15.2%
20%
20%
16%
9.9%
12%
4.1%
3.5%
15%
2.4% 2.7%
3.1%
3.1%
3.4%
3.5%
3.7%
5%
0%
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Jun-04
Sep-04
Dec-04
Mar-05
Jun-05
Sep-05
Dec-05
Mar-06
Jun-06
Sep-06
Dec-06
Mar-07
Jun-07
Sep-07
Dec-07
Mar-08
Jun-08
Sep-08
Dec-08
Mar-09
Mar-09
Feb-09
Jan-09
Dec-08
Nov-08
Oct-08
Sep-08
Aug-08
0.9% 1.0%
Jul-08
0%
12.5% 12.8%
10%
8%
4%
11.1%
13.7% 14.3%
Source: National Bank of Georgia, FSA
Source: National Bank of Georgia, FSA
US$ mln
748.6
712.0
648.1
548.5
400
296.2
200
9.1
21.7
25.7
21.4
33.8
15.6
60.6
54.0
42.9
58.3
36.6
50
63.8
100
99.7
150
579.8
600
200
172.2
US$ mln
250
Banking Sector Cumulative Outflow
Banking Sector Cumulative Inflow
721.4
661.4
800
226.4
300
Foreign debt refinancing
US$468.5 mln of
US$548.5 mln banking
sector debt, due in
Q1 and Q2 0f ‘09, has
already been repaid
252.2
350
296.2
Foreign debt outflow
0
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
'09 '09 '09 '09 '10 '10 '10 '10 '11 '11 '11 '11 '12 '12 '12 '12
Source: National Bank of Georgia, FSA
www.georgia.gov.ge
Q 1 2009
Q 2 2009
Q 3 2009
Q 4 2009
Source: National Bank of Georgia, FSA
Georgian Economy Overview
May 2009
12
Recent Reforms - Taxation
‘04A
‘05A
‘06A
‘07A
‘08F
‘09F
‘10F
‘11F
‘12F
‘13F
21
7
7
7
6
6
6
6
6
6
VAT
20%
20%
18%
18%
18%
18%
18%
18%
18%
18%
Income Tax
1220%
12%
flat
12%
flat
12%
flat
Social Tax +
Income Tax
32%
25%
Social Tax +
Income Tax
20%
Social Tax
33%
20%
20%
20%
-
Corporate
Profit Tax
20%
20%
20%
20%
Dividend
income tax
10%
10%
10%
10%
Number of
Taxes
20%
18%
15%
15%
-
-
-
-
-
15%
15%
15%
15%
15%
15%
10%
5%
5%
3%
0%
0%
 Out of 21 taxes under the former tax code, only 6 exist today
 Tax rates reduction timetable has been further accelerated in key tax rates in 2008
 This will provide a significant stimulus for the economy in 2009 and beyond
 Georgia, over the last five years, has evolved into one of the most attractive low-tax jurisdictions in Europe
www.mof.ge
Georgian Economy Overview
June 2009
13
Special Taxation Regimes Adopted
• Special taxation systems have been adopted for the different regimes aimed at establishing new
international financial institutions in the country, encourage economic growth, support
sustainable development and the trade-transit function of Georgia
An international financial
company
Free industrial zone
Free warehouse company
(from financial services) 0%
(for International
Companies) 0%
(from re-exporting of
foreign goods) 0%
0%
0%
0%
Customs Tax
0%, 5% or 12%
0%
0%
Property Tax
up to 1%
0%
up to 1%
20%
20%
20%
Type of tax
Corporate Income Tax
Value Added Tax
Personal Income Tax
www.georgia.gov.ge
Georgian Economy Overview
May 2009
14
Increasing Integration Into the Global Economy
 The taxation in Georgia provides low, flat tax rates and double taxation
avoidance treaties with 24 countries – a unique combination in the world
 FTA with the CIS countries
 FTA with Turkey
 GSP+ with the EU
 GSP with the US
 Possible developments in the nearest future:
 FTA with EU
 FTA with USA
www.mof.ge
Georgian Economy Overview
June 2009
15
Customs Code Amendments
•
•
Existing Requirements:
The customs value of goods carried into the Georgian customs territory, processed from
the goods carried out under the customs regime for processing the goods outside the
customs territory will be diminished by the customs value of Goods declared and carried
out for proscessing purposes. It is not defined whether the cost of transportation (carrying
in and out) should be included.
•
Proposal:
It will be determined, that when carring in the processed good, as customs value shall be
considered only the value added through the processing, with no regard to transportation
costs.
www.mof.ge
Georgian Economy Overview
June 2009
16
Tax Code Amendments
VAT Treatment During Exporting Services
Existing Requirements:
Under the existing requirements taxpayer rendering services outside the territory of Georgia is not
eligible to claim VAT paybacks
Proposal:
Taxpayer acquires the right to claim VAT paybacks for services rendered outside the territory of Georgia
www.mof.ge
Georgian Economy Overview
June 2009
17
Tax Code Amendments
Financial Lease
Reason:
•
•
•
•
•
According to the current law leasing is considered as supply of goods, yet for the purposes of
VAT, it is considered as service and is taxed accordingly.
Leased assets in its total value is considered as supply of goods, although essentially it is
divided in two parts, because the lessor transfers an asset in discounted value to the lessee
and receives interest from the given asset, which basically means income from certain
financial service rendered, but not income generated from the supply of goods. Given the
abovementioned, regulation of leasing is vague and inaccurate.
Proposal:
leasing must be considered as provision of service, taking into account certain conditions;
Discounted value of income generated from leasing (10% rate applicable) shall not be less
than the difference between the present value of a given asset and its expected residual
value.
At the end of the lease term, lessee may acquire the leased-asset at its residual value, which
may not be higher than 15% of the fair market value of the asset at the beginning of the
lease term.
www.mof.ge
Georgian Economy Overview
June 2009
18
Tax Code Amendments
Partnership and Taxation of Income
•
•
•
•
•
•
Reason:
according to the existing tax code a partnership is obliged to allocate taxable income (profit)
to the shareholders (partners), however, there is no complete mechanism of partnership
taxation that would regulate total income, deductions, calculations, tax payment, tax
declaration and other matters related to tax liabilities of the partnership and its members.
Proposal:
Taxable income of partnership will be allocated to its shareholders, in accordance with their
shares, and will be included in the total income of the shareholders;
Shareholder is obliged to tax the abovementioned income, with no regard whether the
partnership has distributed the profit or not;
Obligation of a partnership to submit the declaration is defined, and a partnership becomes
liable to submit to the tax authority the information on the income received per share and
the distribution of profit among the shareholders;
If a member of a partnership is not a registered taxpayer, a partnership is obliged to withhold
the tax, whereas the member may claim the credit in the same amount as taxed at source.
Losses of a partnership will not be allocated to the shareholders and will be carried forward
and reimbursed through the profit generated in the following years.
Is effective from 1 January 2011
www.mof.ge
Georgian Economy Overview
June 2009
19
Economy Remains Resilient
Economy remains resilient due to the following reasons
•Donor support
•Diversified economy
•Reforms – strong economic fundamentals
Georgia is committed to continuing reforms
•Continue building strong democratic institutions
•Rule of Law and judiciary reform
•Further lighting tax burden
•Economic liberalisation
www.mof.ge
Georgian Economy Overview
June 2009
20
Contacts
Kakha Baindurashvili
Finance Minister of Georgia
[email protected]
www.mof.ge
Zurab Simonia
Director of Investment Risk
Management Agency
[email protected]
Georgian Economy Overview
June 2009
21