Georgia considers removing ban on raising taxes from constitution

14 June 2017

Georgia’s State Constitutional Commission is considering removing a provision in the constitution which requires a referendum to be held before new taxes or tax increases can be introduced, except for excise taxes, and forbids progressive taxation.

Georgia’s government, which enjoys a constitutional majority in parliament, is implementing sweeping changes to the country’s constitution and are now discussing the amendments in parliament.

The proposal came from Constitution for Equality, an umbrella group uniting a number of left wing outfits including the Social Democrats political party, student group Auditorium #115, and several others.

‘No country in the world has constitutional limitations on introducing new taxes’, the initiative group said, adding that several European countries prohibit holding referendums on taxation issues.

Several non-governmental organisations including Transparency International — Georgia, the Economic Policy Research Centre, International Society for Fair Elections And Democracy (ISFED), and others released a statement on 14 June to denounce the possible amendment. They say that this article of the constitutional is important for ‘maintaining and developing an attractive business environment and economic growth’.

The International Chamber of Commerce of Georgia (ICC) also released a statement claiming the current article is vital for maintaining the ‘attractiveness of Georgia for foreign investment, since predictability and visibility of the the state tax policy are crucial parameters affecting the decision making process of any foreign investor looking into doing business in Georgia’.

This article of the constitution was passed in 2010 as part of Georgia’s Liberty Act. It was part of the then ruling United National Movement’s liberalisation economic policy.

Head of Constitutional Commission, Speaker for Parliament Irakli Kobakhidze, said on 5 June that ‘serious discussions’ will be held in Parliament regarding the amendment.

President Giorgi Margvelashvili has supported the amendment, with Parliamentary Secretary Ana Dolidze saying that the president thinks it is not advisable to include this article in the constitution.

There are only six taxes in Georgia, all are flat taxes. These include a 20% personal income tax, 15% corporate profit tax, 18% value added tax (VAT), 0, 5, or 12% import tax, excise tax on a few selected goods, and property tax of up to 1%.

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