Can VAT exemption on dairy products produced from domestic raw milk boost the competitiveness of the Georgian dairy sector?

The objective of the study was to estimate the potential impact of VAT exemption on dairy products on the competitiveness of the dairy sector in Georgia.

The research team assessed the impacts of the VAT exemption using quantitative and qualitative analysis methods:

• Applying Regression Analysis to derive elasticity coefficients for demand and supply of two related markets: raw milk and dairy products;

• Employing partial equilibrium analysis to derive new equilibrium quantities and prices of raw milk and dairy products in case of VAT exemption;

• Conducting face-to-face interviews with sector representatives to get their perception about VAT exemption on dairy products.

The study assessed the potential impact of VAT exemption on the state budget, raw milk, and milk products’ producers as well as consumers.

The research team developed recommendations for VAT exemption policy implementation in order to contribute to the increase in the competitiveness of the Georgian dairy sector.