New law passed in Georgia

The ‘United National Movement’, the Georgian party that won the elections on May 30th with 66% of the votes, has initiated a tax reform.
President Saakashvili said that the next parliamentary elections will be held no sooner than spring 2012, which gives 2 years for radical economic reforms. According to the project, the new tax rules mainly concern ‘micro-businesses’ and ‘small businesses’, which will receive significant tax benefits. For example, ‘micro-businesses’ with a turnover of less than $17,000 will have tax exemptions. ‘Small businesses’ with less than $108,000 turnover will pay only 3 to 5% tax. Small business will be freed from VAT.
Saakashvili said that the primary goal of the tax reforms is creating additional employment, even if it requires reducing budget expenses in the social sphere. The code introduces tax exemptions for newspapers and magazines as ‘socially sensitive’ sectors. The Minister of Finance, Kakhi Baindurashvili, said that the taxes from all publishing agencies would not exceed the taxes from a medium-size company.

At the same time, Baindurashvili said that the former strict tax code had been necessary to prevent corruption and tax evasion. Today there is no such need, with improved Georgian tax discipline and low corruption level. The new code is aimed at strengthening trust between businessmen and the tax services. Businessmen will pay VAT every quarter instead of monthly. ‘Honest taxpayers’ will receive benefits.
The authorities will establish an institution of ombudsmen to protect the rights of businessmen.
Critics of the reform say that the budget will lose great sums of money. But the government group says that they are increasing taxes for large companies, like alcohol producers and cellphone companies.

Georgiy Kalatozishvili, Tbilisi. Exclusively for VK