PROBLEMATIC ISSUES OF THE EXCISE POLICY OF GEORGIA

The article considers problematic issues of excise policy related to the taxation of tobacco products. Changes in the excise duty rates on tobacco in Georgia over the last ten years are also discussed. Tobacco products (cigarettes) are commodities that are characterized by particularly inelastic demand and price changes reduce the demand for it to a lesser extent. If different taxes, iincluding the excise duty rates on cigarettes have risen sharply above reasonable levels, making them inaccessible to a statistically significant number of consumers, a strong motivations appears instantly, and illegal supply channels are quite quickly setting up. Such a scheme of development of the situation has taken place many times around the world, even in much more economically developed countries, where the share of tobacco spending in citizens' budgets is much lower. Comparing the codified versions of different periods of the Tax Code and other normative acts, it it has been established that from 2011 to 2021, excise rates on filtered cigarettes increased by an average 5.6 times, and on unfiltered cigarettes - 19 times. The share of taxes (excise and VAT) already exceeds 75% of the average retail selling prices for cigarettes. The reason for the multiple increase in the tax burden on tobacco products is usually the international obligations of the country, both in terms of tobacco taxation to the World Health Organization and in the framework of the Association Agreement with the European Union. Fiscal purposes were also important in implementing the excise policy. The state needed to find additional sources of revenue for financing the increased public expenditure, and under Georgian law, excise duty is the only common State tax that can be increased without a referendum. A sharp rise in excise rates has significantly increased the tax burden on tobacco consumption. This has led to a series of unforeseen consequences. According to official statistics, both local production and imports of tobacco products have significantly decreased. As a result, the demand for excise stamps has sharply decreased. Therefore, the fiscal effect of the multiple increase in excise duty rates on tobacco has been largely offset. However, the reduction in the intensity of tobacco use is not confirmed by any reliable research or reasonable estimates. This indicates that we are dealing with a significant increase in excise duty-free cigarette smuggling and illicit trafficking. This fact is confirmed by statistics - there is a sharp increase in both administrative and criminal offenses in this field. This situation and the discussion of the relevant threats is the subject of this article. We think that excise policy, especially with regard to tobacco products, is one of the most important issues in recent years, which needs to be addressed. `