COCONSTCONSTRUCTION AT THE EXPENSE OF VANISHED MILLIONS

Despite the sluggish Georgian economy, some branches function quite successfully. House building is prosperous in the background of crisis. This branch must be an important part of gross domestic product and tax base, but…

Great economic considerations and analyses disregard the fact that construction of one square meter flat in Tbilisi costs 150-160 US dollars with its selling price being 300-500 US dollars. Construction is a profitable business taking into account the fact that more than 200 buildings with 4000-5000 square meters are built. The cost of construction is 600 000-750000 thousands and realisation cost is 120 000-225 500 thousands. These are GDP data – 1,5 millions multiplied by 200 in average, i.e. three hundred million dollars or six hundred sixty million dollars, which is 10% of GDP. Budget receipts from this branch should total 60-80 million laris in the form of profit taxes while 50-60 millions should go to social funds. If we believe construction economists, minimum 40% of construction cost is spent on salaries with half of the sum being spent on taxes. Budget receipts should total 120-130 million laris, but in realty there is nothing in the budget. Yet, it is quite difficult to conceal such large-scale construction from tax inspectors. There is the only conclusions: this sector of economy has a powerful protector!
What can be better than construction of the city. Can one feel displeased with construction after years of ruination? Can one feel discontent with change of “Khrushov” houses into modern ones. However, if flats cost cheaper, no one would say anything for the sake of people. Yet, this business is not in the interests of state and population. This is too much already.
Compared with experience of Moscow, let alone Western countries, where one square meter costs 1000-1500 US dollars, the business is an important source of budget there. After this we intend to collect taxes from taxi drivers and street traders. We will not be able to lift economy out of crisis unless this issue is settled and business is legalised. This branch is the most successful and illegal one. Is there a chance to settle this problem by legalising construction so that constructors would be content with financing and people would be able to buy cheap flats. There is this chance and it can be easily implemented.
We will speak about this in the next magazine issue.