The messenger logo

How have wages fallen in May?

By Natalia Kochiashvili
Tuesday, June 23
The Treasury of the Ministry of Finance has published a report on the implementation of the May 2020 budget. According to the document, in May 2020, the state budget revenue from income tax amounted to GEL234.1 million GEL, which is GEL39.9 million or 14.6% less than the same period last year. Consequently, the decrease in the amount of budget revenues in the form of income taxes indicates a decrease in the amount of salaries issued in the country. More specifically, this decrease indicates a reduction of almost GEL200 million in salaries.

The income tax rate in the country is 20% and it is mostly paid by contract employees. Due to the economic crisis of COVID-19, more than 90 thousand people have already applied to the Ministry of Finance for GEL200 compensation, therefore, they have lost their income in the form of salary. Another factor affecting the reduction of the income tax is the exemption of GEL750 from the income tax for the private sector and partial exemption from the income tax up to GEL1500.

The profit tax amounted to GEL43.7 million in May, which is GEL28.2 million, or 39% less than the previous year.

Like income tax, income from VAT and profit tax is reduced.

The amount of VAT declared by value-added taxpayers last month was a total of GEL196.3 million, which is GEL118.2 million or 37% less than the VAT paid in May 2019.

The increase in value-added tax is directly related to the turnover of the business sector in the country, while its annual decline of 37% indicates a sharp decline in economic activity in May.

It is the turnover of VAT-paying enterprises that is based on Geostat's assessment of monthly economic growth. The economic decline in the country in April was 16.6%, and the economic growth in May will be announced on June 30th. It is expected that due to the 37% reduction in VAT, the economic decline in May will be as dramatic as it was in April.

It’s noteworthy that Georgian taxpayers may be required to subsidize the salaries of those employed in the private sector - this will happen if the parliament passes a bill prepared by members of the Georgian Dream. The bill was discussed at the sitting of the Parliamentary Committee on Health and Social Affairs.

According to the author of the bill, Sophio Kiladze, the bill will be an ‘expression of care’ by the state. The name of the bill is ‘On Supporting Employment’ and its initiators are Georgian Dream MPs - Sophio Kiladze, Irakli Kobakhidze and 16 others.

The mechanism that GD MPs plan to introduce looks like this: under the bill, wage subsidies will only apply to certain categories of people, including people with disabilities, the socially vulnerable, and IDPs.

Companies that hire and employ these individuals in their own stuff will receive a 50% subsidy on the salaries of these individuals, which will be paid to the additional employee.

According to the draft law, employment via subsidizing labor remuneration is a material benefit for the employer in order to employ a job seeker who is: a person with IDP or socially vulnerable status from 16 to 29 years of age; persons with disabilities or with special educational needs; a person between the ages of 16 and 29, who is under state care and is out of state care; and other persons approved by the Government by a relevant resolution.

The employer may, in order to employ the unemployed referred to in paragraph 1 of this Article, apply to the Agency for a labor remuneration subsidy if it offers the job seeker a contract of employment indefinitely or for a period of not less than 6 months.

An employment contract that provides for subsidies is concluded for a period of at least 9 months. Employees will be given a subsidy for no more than 3 months.

The employer is obliged to return half of the subsidy if the employment relationship is terminated less than 9 months after the conclusion of the employment contract at the initiative of the employer, without the grounds established by the labor legislation.

The content of the agreement on the issuance of the subsidy and the rules of payment shall be regulated by the legislation of Georgia and the resolution of the Government.