Issue 26: Tax Revenue – January-May 2014

In January-May of 2014, the state budget total revenue of Georgia increased (4.7%; 127.7 mln.GEL), compared to the respective period in 2013. This is due to significant increase of tax revenue (5.1%; 131.1 mln.GEL) and other revenues (17.0%; 16.1 mln.GEL). Interestingly, in this period the volume of the revenue from grants (-29.6%; -19.5 mln.GEL) remarkably shrinked. The reduction in the volume of grants has no significant impact on the the total revenue, since the contribution of grants in total revenue is only 1.6%.

In January-May of 2014, the volume of expenses also increased (18.7%; 437.1 mln.GEL). There was large increase in the volume of expenses on social benefits (33.2%; 253.1 mln.GEL) and also reduction in the volume of expenses on infrastructural projects (-5.7%; -7.4 mln.GEL). This is alarming, because, all else equal, the social expenses do not generate economic growth, unlike infrastructural projects.

It should be noted that in January-May of 2014 the revenue from the VAT increased (12.3%; 139.0 mln.GEL), but the revenue from the income tax decreased (-4.0%; -28.4 mln.GEL), compared to the same period in 2013. The VAT tax increase reflects the growth of economic activity.

In January-May of 2014, the volume of the total state budget revenue increased (4.7%; 127.7 mln.GEL), due to the increase of the tax revenue (5.1%; 131.1 mln.GEL) and other revenues (17.0%; 16.1 mln.GEL), compared to the same period in 2013. At the same time, revenue from grants remarkably decreased (-29.6%; -19.5 mln.GEL), compared to 2013.

In January-May of 2014, the volume of total expenses from state budget also increased (18.7%; 437.1 mln.GEL). This is due to increase of expenses on social benefits (33.2%; 253.1 mln.GEL) in the respective period in 2014, compared to the 2013.

It is noteworthy, that in January-May of 2014 expenses on infrastructure decreased (-5.7%; -7.4 mln.GEL), and at the same time revenue from the privatization increased more than five times (543.9%; 33.2 mln.GEL), compared to the same period in 2013.

In January-May of 2014, the volume of revenue from the VAT increased (12.3%; 139.0 mln.GEL), which reflects the growth in economic activity (7.4%) in the first quarter of 2014, compared to the respective period in 2013. In the first five months of 2014, the actual revenue from the VAT amounted to 85.3% of the indicator, planned for the first half of 2014. Under such dynamics of the VAT revenue collection, there will be no problem to complete the planned indicator of VAT revenue for 6 months.

In January-May of 2014, the revenue from income tax decreased (-4.0%; -28.4 mln.GEL). In the first five month the actual revenue from the income tax amounted to 89.7% of the indicator, planned for the first half of 2014.

In the first quarter of 2014, the revenue from the income tax increased (5.3%; 22.2 mln.GEL) compared to the first quarter of 2013. This is due to increase of labor cost in private (11.0%; 110.9 mln.GEL) as well as in public sectors (13.8%; 36.4 mln.GEL).

In April and May 2014, the revenue from the income tax decreased (-17.5%; -50.6 mln.GEL) compared to the corresponding period indicator in 2013. This reduction is due to the return of the untaxed income to the employees with average monthly salary of 500 GEL.

In May 2014, the revenue from the income tax shrinked (-12.7%; -17.9 mln.GEL), compared to the corresponding indicator in May 2013.

In May 2014, the revenue from VAT increased (14.8%; 34.5 mln.GEL) compared to the indicator of May 2013. Generally, the amount of VAT tax drawn in the current period is determined by the turnover of a VAT payer enterprise in the previous month. Hence, in April 2014, the turnover of VAT payer enterprises increased by 4.8%, compared to April 2013.

On average, in January-April of 2014 the growth rate of the turnover of VAT payer erterprises is 13.2%, which is reflected in the significant increase of the budget revenue from VAT tax (12.3%; 139.0 mln.GEL) in January-May of 2014, compared to the same period in 2013.