On 24 July 2014, in his interview with the British newspaper, The Guardian, the Minister of Economy and Sustainable Development of Georgia, Giorgi Kvirikashvili, stated: “We have the lowest taxes in the region, simplified border procedures, a corruption-free environment and very good public services. None of the countries in our region can offer such conditions to the West.” (www.ipn.ge) FactCheck

took interest in this statement and verified its accuracy.

A comparison of the business conditions in the different countries of our region requires a complex economic analysis. However, in order to simplify the task we can use the international ratings which monitor the investment and economic conditions of the countries. These ratings look into the factors that influence the commercial activities inside the country. One of the most popular of such ratings is Doing Business which is carried out by two organisations of the World Bank Group: the World Bank (WB) and the International Finance Corporation (IFC). This research has been carried out in all of the World Bank Group member states since 2004. Doing Business

includes the following components:

  1. Starting a business
  2. Dealing with construction permits
  3. Getting electricity
  4. Registering property
  5. Getting credit
  6. Protecting investors
  7. Paying taxes
  8. Trading across borders
  9. Enforcing contracts
  10. Resolving insolvency
According to Doing Business 2014 (research of 2013), Georgia holds the 8th position in the ease of doing business rating. In 2013 (research of 2012) Georgia held the 9th position in the rating whilst in 2012 it ranked 16th.

It would also be of interest to examine the different components of the aforementioned research and compare them based upon the region.

Chart 1:
Component/Country Georgia Azerbaijan Armenia Turkey Ukraine Romania Bulgaria Russia
Doing Business 2014 Ranking 8 70 37 69 112 73 58 92
Starting a Business 8 10 6 93 47 60 65 88
Dealing with Construction Permits 2 180 79 148 41 136 118 178
Getting Electricity 54 181 109 49 172 174 135 117
Registering Property 1 13 5 50 97 70 62 17
Getting Credit 3 55 42 86 13 13 28 109
Protecting Investors 16 22 22 34 128 52 52 115
Paying Taxes 29 77 103 71 164 134 81 56
Trading Across Borders 43 168 117 86 148 76 79 157
Enforcing Contracts 33 28 112 38 45 53 79 10
Resolving Insolvency 88 86 76 130 162 99 92 55
Source: Doing Business 2014. World Bank

Chart 1 makes clear that Georgia is a leader in the majority of components. However, it should also be noted that the main focus of the research is to determine the number and difficulty of the bureaucratic procedures and it does not take into account other important factors such as: the qualification of the labour force or the infrastructure development level. However, Georgia does have the best results in the fields of taxes and public services, as stated by the Minister.

According to the statement of Mr Kvirikashvili, Georgia has the lowest taxes in the region. The Doing Business

research addresses the issue in its component of tax administration. The amount of taxes and their share in the untaxed earnings of the companies are calculated separately for each country. The results for the aforementioned list of countries look like this:

Chart 2:
Country Georgia Azerbaijan Armenia Turkey Ukraine Romania Bulgaria Russia
Number of Payments 5 18 10 11 28 39 13 7
Share of Taxes in the Total Profit of the Company % 16.4 40 38.8 40.2 54,9 42.9 27.7 50.7
Source: Doing Business 2014. World Bank

Chart 2 shows that Georgia does have the lowest taxes as compared to the other countries of the region. The number of payments is also fewer, indicating fewer bureaucratic problems.

Giorgi Kvirikashvili also talked about the low levels of corruption. According to the research of Transparency International, Georgia holds the 55th position in the 2013 world ranking of corruption and only Turkey has lower corruption levels in the region (53rd position). Russia and Azerbaijan ranked 127th, Armenia – 94th, Romania – 69th and Bulgaria was 77th.

Hence, this part of the statement of the Minister is also mostly true.

Conclusion As a result of its study FactCheck

found that Georgia does indeed have the lowest taxes and fewest bureaucratic barriers in the region. It is also a leader with the lowest levels of corruption. However, it should be pointed out that when it comes to the decision of whether or not to invest in a country, not only low taxes and bureaucratic procedures are taken into account by the investors. The most important factors in this sense include: qualification of the labour force of the country, the extent and the potential of the economy and the necessary infrastructure for international transits (level of development of sea ports, railroads and motorways). Geopolitical and domestic stability are also taken into account. These factors greatly influence the decisions of the investors in most of the cases. Even though Georgia can offer a good environment for investment, it lacks the level of infrastructure and extent of the economy enjoyed by Turkey, Romania and Bulgaria.

Based upon the aforementioned factors, FactCheck concludes that Giorgi Kvirikashvili’s statement: “We have the lowest taxes in the region, simplified border procedures, a corruption-free environment and very good public services. None of the countries in our region can offer such conditions to the West,” is MOSTLY TRUE.