THE IMPACT OF TAXATION ON THE FINANCIAL SUSTAINABILITY OF THE SMALL BUSINESS SECTOR: AN EMPIRICAL ANALYSIS OF THE GEORGIAN EXPERIENCE

Contemporary economic trends have underscored the critical role of small businesses, whose development is considered essential to a country's overall economic progress. Reflecting this recognition, the Government of Georgia has directed its economic policy toward fostering a favorable entrepreneurial and investment environment for the private sector, with particular emphasis on small enterprises. Small businesses serve as a central pillar of the nation's industrial policy, which seeks to accelerate the redistribution of resources from the public to the private sector. This, in turn, is intended to generate sufficient employment opportunities and contribute to the overarching goal of sustainable development, specifically “overcoming the level of poverty.” The purpose of this study is to determine the impact of the newly introduced preferential income tax regime on the financial sustainability of the small business sector in Georgia. This article discusses the mechanisms of small business taxation in Georgia within the context of the newly introduced special tax regime. It evaluates the dynamics of the tax burden on small enterprises and assesses its implications for their financial stability. The scientific novelty of the paper lies in the fact that, for the first time in Georgia, an empirical assessment has been conducted of the impact of the tax burden on the financial indicators of small businesses. New empirical results have been obtained regarding the interrelationship between the tax burden on small businesses and their turnover indicator in Georgia, enabling an evaluation of the effectiveness of tax regulation. The main trends in the influence of tax policy on small business activities have been substantiated, pointing toward improvements in the tax environment. The research findings can be applied in the process of refining tax policy and promoting small business development.