Dateline: Tbilisi, Georgia
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I’m staring at what must be a 10-ounce pour of sweet Georgian wine at my dinner table in Tbilisi. If US restaurants call 7-ounce pours “generous”, then I’m calling this (slightly over-chilled) glass a “Georgian pour”.
That’s the kind of same value you can expect when doing business in the increasingly western nation of Georgia, located in the Caucasuses just east of Turkey.
“International Man” Doug Casey has frequently said that any country can become “Russia in the 1920s, Germany in the 1930s, China in the 1940s, Cuba in the 1950s, the Congo in the 1960s, Vietnam in the 1990s, Afghanistan in the 1980s, or Bosnia in the 1990s”.
While he is indeed correct, and he makes the case for international diversification, I also prefer to be positive.
We frequently discuss some of the world’s economic success stories that realized that offering value to attract business and wealth is important. Singapore in the 1950s and the Cayman Islands in the 1970s are just two examples.
Add Georgia in the 2000s to that list.
It didn’t take long after gaining independence in 1991 for Georgian politicians to realize they needed to do something great to put themselves on the map.
After all, fifty percent of the Georgian workforce is involved in agriculture (16 to 50 times the developed world average), while farmland here isn’t as high quality as Ukraine. As a result, workers are gradually moving to the cities.
However, many of these workers won’t have jobs waiting for them, and it’s not as if Georgia is as cheap a place to manufacture low-cost goods as, say, Bangladesh.
That’s why, in 2004, the Georgia government slashed the number of taxes from 21 to just six in order to stimulate the economy. Gone is the byzantine tax structure that once existed.
In its place is a simply, easy to understand tax system that includes just the basics: a flat 20% personal income tax, a flat 15% corporate profits tax, and several other low income taxes.
As a result, Georgia has become one of the most capitalist countries in the world.
Just walking around the capital city of Tbilisi the last few days has shown an exercise in efficiency.
Opening a bank account here is super easy. You can be in and out in less than an hour – soup to nuts – and several of the larger banks offer excellent online banking services, debit cards you can use anywhere on earth, and accounts in practically any currency you want.
Want another account once you leave Tbilisi? No problem; just add one in your internet banking.
If you’ve ever walked into some offshore bank and been told you don’t qualify to open an account because you don’t have a local job or because you’re a US person, Georgia will come as a welcome surprise.
On top of the ease and efficiency of opening an account, the larger banks stay open until 8pm most days. I’m told there are even a few 24-hour options available.
And ATMs are everywhere here in the city. So are bill pay machines. All up and down the city streets, you can pay your mobile phone or utility bill at one of an endless number of machines that make the process easy.
Everything here runs efficiently.
The country’s Public Service Hall, where you can form a corporation or apply for residency, looks more like a well-run airport check-in area than a government office.
In addition to cafes and bank branches, this government office has each business function conveniently set up in pods where you take a number, then go to the appropriate area for what you need.
Wait times are practically zero, even when the place is teeming with life.
While Georgia is not a tax haven and doesn’t have a de facto policy to incorporate companies in five minutes like The Gambia promises, you can pay more to speed up practically any service.
Want to form your company in a matter of hours? A few extra bucks and you’re done. Take the papers, head to the bank, and open your account. You could literally start an entire company, bank account and all, in one day here. All for around $500.
Want to apply for a second residency, but don’t want to wait two or three months for an answer? For $100-200 more, you can get an answer within days.
Even citizenship applications can get a guaranteed answer within a matter of a week for a nominal fee.
All this efficiency has western businesses taking notice. A recent survey of businessmen suggested that perception of corruption in Georgia is about as low as you can go.
In a region that doesn’t have the best reputation, businesses give Georgia high marks. In fact, the country is, by one estimation, the fourth most free market in the world.
One example of this is the fact that seemingly everyone here is in the money exchange business. Just walk down any main street and you’ll see signs offering to exchange dollars, euros, Turkish lira, and Russian rubles at close-to-spot rates.
Some of these places are your typical money exchange businesses, while others are mom and pop operations. I changed $100 I got out of an ATM (all ATMs dispense cash in Georgian lari or US dollars) into lari in the back of a woman’s clothing store.
No paperwork, no passport, no nonsense. Just ultra-low spreads and the free market at work. (Although the ability to speak a little Russian helps at times.)
You could argue that Eurasia didn’t need another pseudo-tax haven. Europe, of course, has Ireland, which gained its Celtic Tiger reputation by slashing corporate tax rates to 10% and 12.5%. Even though the country has pledged to abandon the Double Irish plan used by tech companies, I expect rates in Ireland to stay low for awhile.
Elsewhere, Bulgaria has the European Union’s lowest corporate tax rate at a flat 10%, with nearby Montenegro at a low 9%. Estonia charges a flat tax rate of 0% until you pay dividends, which are taxed at 20%.
Georgia’s flat 15% tax rate fits in nicely with those western countries, but Georgia offers the benefit of a Eurasian country that makes things incredible easy.
And they are continuing to cut taxes. Just this year, they slashed a number of 5% withholding taxes down to zero.
Georgia is also well situated to deal with Russian, Middle Eastern, and CIS businesses and clients.
The place certainly isn’t for everyone. Georgia is not another island tax haven that lets you start a business and run wild without any checks or balances. But the consensus is that the government is extremely keen to attract almost any kind of business.
And Tbilisi has an interesting feel to it. It’s like the quaint European streets of Vilnius or Tallinn met the awkward open spaces of Kosovo or Macedonia. But there is a lot of room for opportunity, from entrepreneurship to real estate.
Oh, and they actually like Americans here. I guess being from a country looking to start a war with Russia will do that for you.
But that does mean that anyone can bank, do business, or live here. If you’re a westerner, they’ll welcome you with open arms.