Nana Zazadze
Ph.D. in Economics, Associate Professor, Samtskhe-Javakheti State University, Caucasus International University
zzdznn@yahoo.com
Abstract
In today’s globalized economic environment, investors pay close attention to jurisdictions’ tax systems and business risks when making investment decisions. Countries characterized by high political and economic instability and weak investment protection mechanisms often face a shortage of foreign investors. In such conditions, governments tend to introduce tax incentives to attract foreign capital.
The case of Georgia clearly reflects this process. In recent years, the country has implemented tax reforms aimed at reducing the tax burden and creating a more attractive environment for businesses. However, against the backdrop of ongoing economic and political challenges, bank lending interest rates remain high. These high rates often reflect macroeconomic uncertainty and increase financial risks for businesses, which negatively impacts investment volume and economic growth.
The aim of this study is to empirically confirm the relationship between low tax rates and high business risks, with particular focus on bank interest rates. The research demonstrates that despite relatively low taxes, high business risks and interest rates significantly hinder investment inflows. Through the analysis of statistical data, the study explores how tax incentives function as tools of economic development in countries like Georgia and identifies the key challenges in improving the investment climate.
The research utilizes various economic and financial indicators reflecting tax policy, business risks, and bank lending conditions. The conclusions drawn from the study will form the basis for policy recommendations aimed at enhancing the investment climate and supporting economic development in Georgia.
Keywords: Business Risks, Low Taxes, Interest Rates, Investments
JEL: H25; E44; F21
DOI: 10.52244/c2025.33
The article is in Georgian.
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