State budget revenues for the first quarter of 2025 were executed at 100.5% of the plan with tax revenues reaching 102.3%. Despite the overall fulfilment, several individual taxes underperformed, in some cases missing the targets by over 10%. However, the planned increase in external liabilities was achieved by only 50% with no funds disbursed under the budget support loan component.
State budget revenues for January-March 2025 were projected at GEL 6.619 billion with taxes expected to contribute GEL 5.308 billion, or 80% of the total, according to the plan. However, only income tax collections were officially collected of the major tax categories whereas the profit tax, excise tax, VAT and import tax projections were not fulfilled. Meanwhile, the category for the other taxes significantly exceeded the target, reaching 261% of the planned amount.
Table 1: Performance Indicators of the Tax Revenue Component of the State Budget
Source: State Treasury
The largest shortfall was observed in excise tax collections. Furthermore, whilst there was a significant percentage gap in import tax revenues, the monetary loss was relatively smaller – GEL 4 million. Without the over performance in other tax categories, overall tax revenue would have stood at 98.3% of the target, resulting in a shortfall of GEL 89 million.
Following the publication of the report, questions were raised regarding both the excise tax shortfall and the surplus in the category aggregating other taxes. The government may have started collecting taxes from businesses in advance according to some politicians and economists. However, Lasha Khutsishvili explained that the discrepancy stemmed from undeclared funds. He noted that revenues from profit and income taxes have increased, with part of the collected amounts currently undeclared, to be reconciled by the 15th of the following month.
Examples from previous years can be used for comparison to better understand whether or not the underperformance of individual tax categories poses a problem for the overall revenue target.
Table 2: Performance Indicators of the Tax Revenue Component of the State Budget (January-March)
Source: State Treasury
There were three instances prior to 2025 – 2016, 2019 and 2024 – when revenue from “other taxes” in the first quarter exceeded 200% of the planned amount. The most striking case was 2016 when collections in this category reached 8,755% of the target with GEL 326 million transferred instead of the planned GEL 10 million. Notably, the recorded amount under “other taxes” had dropped to GEL 300 million by January-August of that year and by January-October, it remained lower at GEL 310 million. The first quarter of 2016 also stood out for recording the highest percentage shortfalls in income tax, profit tax and VAT collections.
Revenues from other taxes totalled GEL 98 million in the first quarter of 2019 but fell to GEL 36 million by mid-year. The difference became even larger in 2024, when GEL 699 million was collected in January-March, which fell to just GEL 110 million by January-June.
The state budget has grown year over year and so has the amount mobilised from individual taxes. Total tax revenues increased by 27% between 2013 and 2016, rising from GEL 6.3 billion to GEL 8 billion. Notably, revenues from “other taxes” alone grew from GEL 25 million to GEL 527 million, reflecting a 2,000% rise. However, the planned revenues from other taxes were projected at GEL 150 million in 2017 whilst actual collections totalled just GEL 63 million.
There were two instances where the performance of “other taxes” was negative when looking only at first-quarter data. The plan was set at GEL -41 million in the first quarter of 2018 whilst the actual revenue reached GEL 39 million. Similarly, collections recorded GEL -34 million, although the plan amounted to GEL 302 million.
The plan specifically in the case of “other taxes” was exceeded by more than 200% during the first quarters of 2013-2024 on three occasions, fell short by more than 50% twice and was implemented with over 90% accuracy only twice.
The largest underperformance relative to the plan amongst the main taxes was recorded in the first quarter of 2016. Additionally, profit tax collections reached only 58% of the first-quarter target in 2024, resulting in a shortfall of GEL 420 million. However, the annual target was fulfilled at 101.5% by the end of the year. It is also worth noting that the annual projection itself was revised during that year – from GEL 2.7 billion to GEL 3.1 billion.
The largest shortfall during the first quarter of 2025 was observed in excise tax collections – an outcome not previously observed in any of the first quarters from 2013 to 2024. Excise revenues declined from GEL 515 million to GEL 490 million as compared to the same period last year. Giorgi Kakauridze attributed the aforementioned drop to reduced tobacco imports and existing inventory levels, noting that the situation is expected to improve.
Whilst the performance of each budget item is important, alarm over shortfalls in specific categories based on a single quarter – especially when the overall target has been met – may be overstated.
Although tax revenues remain the primary component of the budget, they typically account for around 80% of total income whereas the remaining 20% comes from grants, other revenues, privatisation, reductions in financial assets and increased liabilities. Notably, the shortfall in external liabilities is even greater than that recorded in excise taxes.
Table 3: Performance Indicators of the State Budget
including by Lasha Khutsishvili. Whilst tax revenue is the main component, the overall budget should be assessed based on total revenues. Are the shortfalls of individual components a concern? Yes, but there is no reason for alarm yet, as similar gaps were often corrected in subsequent months in previous years.
The most notable underperformance currently lies in the external liability component. This may be due to technical delays or even strained relations with Western partners. If the budget support loan remains unutilised in the coming quarters, the resulting shortfall could become far more substantial, reaching up to GEL 600 million.
