According to the press release issued by the Georgian Customs Department on September 1, closing down Ergneti market in the South Ossetian conflict zone, which was once a major trading center for smuggled goods from Russia, helped to increase revenues.
The Kazbegi checkpoint is the only land border linking Georgia with Russia that is controlled by the official Tbilisi. In August 2004 the revenues at Kazbegi customs checkpoint increased five-fold as compared to those in January and reached 4,6 million Lari (approximately USD 2,5 million) against the 900,000 Lari (approximately USD 500,000) in January 2004.
According to the Georgian Finance Ministry, that total customs revenues in August have doubled when compared to August 2003 and reached 65 million Lari (USD 36,1 million). Certainly not all of the growth in revenues is directly attributable to closing of Ergneti market, but the economists estimate that the impact is significant.
The Customs Department also reported that smuggling through Ergneti is estimated to have caused an annual USD 120 million damages in unpaid taxes to Georgian budget per year.
Mainly fuel, food, wheat, and tobacco products were smuggled from Russia via breakaway South Ossetia into the Ergneti Market and then to the rest of the Georgia. The goods were also smuggled from Georgia to Russia - mainly alcohol used for producing the counterfeit vodka in North Ossetia. However, the Georgian authorities provide no estimates for the volume of this trade.
Market in Ergneti was closed down by the Georgian authorities in late May and early June, causing protest of the authorities in breakaway South Ossetia.
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