The tax system of Georgia is a set of taxes and other payments levied by the state from payers - legal entities and individuals - on the territory of Georgia, as well as a set of principles, forms and methods of their collection. The current tax system is codified in the Tax Code of Georgia, adopted in 2005 with subsequent amendments.
Content
History of Taxation in Georgia
The history of class society and the resulting taxation in favor of the ruling class has more than two thousand years in Georgia . The development of taxation as a whole was consistent with global trends and has gone from a full-scale payment, duties, to cash settlements with the budget [1] .
After the collapse of the USSR, independent Georgia formed a tax system based on standard recommendations of the International Monetary Fund , which served as the basis for other countries - former republics of the Soviet Union. As budget-forming, emphasis was placed on indirect and corporate taxes: value added tax , corporate income tax and customs tariffs [2] . In addition to the general inefficiency of the collection and administration, the clash of interests of the ruling elite groups led to an increase in the number of taxes and regulatory bodies. Gradually, the system evolved, and by the time of the Rose Revolution, it was an ineffective set of more than 20 taxes and fees, with several administration and control centers [3] , which created the basis for various abuses and led in 2003 to the actual bankruptcy of the state budget.
During the Saakashvili – Bendukidze reform, which culminated in the adoption of a radically revised Tax Code in 2005 [4] , Georgia’s tax system was greatly simplified. In particular, the multiplicity of tax collection points was eliminated: special funds were abolished, including the Pension Fund, the state budget became a single place for accumulating tax revenues, and the Revenue Service became a single center for their administration. The amount of taxes was reduced to 6 taxes with fixed rates that did not allow discretion in relation to the payer [3] . A special organic (constitutional) law - the Act of Economic Freedom - fixed the principles of budget unity and limiting the number of taxes and the maximum share of GDP redistributed through the budget [5] .
Following the defeat of the ruling United National Movement party in the 2012 election and the re-election of President Mikheil Saakashvili in 2013, the results of the tax reform underwent moderate revision and modification. In particular, the personal income tax, previously planned to be reduced from 20% to 15%, was left at the level of 20% in 2012 [3] . In 2017, by amendments to the Tax Code, the corporate income tax base was limited only to distributed profit, which created significant incentives for reinvestment [6] . In 2018, on the initiative of Prime Minister Bakhtadze , the special tax regime for small entrepreneurs was significantly facilitated: a tax rate of 5% of revenue was reduced to 1% of revenue, and the marginal revenue limits for small entrepreneurs were increased from 100 thousand lari to 500 thousand lari in year [7] .
After receiving a constitutional majority in the 2016 elections, the ruling party “Georgian Dream” managed to introduce a number of amendments to the Act of Economic Freedom that abolish the framework limitation of budget expenditures to 30% of the country's GDP . Other amendments removed pension charges from the scope of the Act, appointed a new administration center for pension fees, and abolished the mandatory referendum to raise tax rates [8] .
Current taxes and rates
Compared to the previous tax regime, in which 21 taxes were in effect, the 2005 Code adopted 6 types of taxes.
- personal income tax - 20% (flat rate) [3]
- corporate profit tax - 15% [9] (from January 1, 2017 replaced by tax on withdrawn capital, at the same rate) [6] , for small entrepreneurs a simplified taxation regime is applied in the amount of 1% of revenue within 500 thousand lari per year [7]
- value added tax - 18% [9]
- excise duty - miscellaneous [9]
- customs duty - 0%, 5% or 12% depending on the category of goods [9]
- property tax - 1% on the self-assessed value of the property [9]
The 2018 amendment to the Act of Economic Freedom removed the requirement to hold a referendum before the introduction of the pension fee and, starting January 1, 2019, the mandatory universal pension fee was introduced from individuals and enterprises, received in the personal account of an individual in the newly formed Pension Fund.
- pension fee - from 4 to 6% of the income of an individual, including 2% of the income of the individual, 2% of the funds of the employer (4% in the case of self-employed persons, while the self-employed have the right to refuse to pay the fee) and 0 to 2% of the state budget [8]
Prospects for the development of the tax system
According to the Prime Minister of Georgia Bakhtadze , Georgia needs tax reform, including the abolition of VAT on a number of categories of goods, the processing of the Tax Code and the expansion of benefits for small businesses [10]
According to the World Bank , in 2014 Georgia took 15th place in the world ranking of ease of doing business [11] and rose in this ranking to 6th place in 2018 [12] . The number of taxpayers and the amount of tax revenue have grown significantly. If in 2003 1.19 billion lari (13.9% of GDP) was collected, then in 2008 4.75 billion lari (24.9% of GDP).
Notes
- ↑ Shepenko 2017 .
- ↑ Forbes-Ukraine 2012 .
- ↑ 1 2 3 4 Grigalashvili 2013 .
- ↑ Tax Code of Georgia .
- ↑ Sputnik-Georgia 2011 .
- ↑ 1 2 Tbilisi Week 2016 .
- ↑ 1 2 Business Georgia 2018 .
- ↑ 1 2 Satellite-Georgia 2019 .
- ↑ 1 2 3 4 5 Taxation 2010 .
- ↑ Satellite-Georgia 2018 .
- ↑ Doing Business 2015 .
- ↑ Doing Business 2019 .
Links
- Georgia Tax Code, current edition (translation into Russian) . Legislative Gazette of Georgia . Date of treatment August 3, 2019.
- Andrey Chernikov, Nina Krasnova. Refusing VAT is more difficult than defeating corruption . Forbes-Ukraine (November 13, 2012). Date of treatment June 20, 2019.
- Shepenko R.A. Georgia's Tax and Duty System: Past and Present . Taxes and Finance 1-2017 (January 1, 2017). Date of treatment August 3, 2019.
- Grigalashvili E. G. The results of the reform of the tax system of Georgia and the prospects for its development . Theory and practice of social development 10-2013 (October 1, 2013). Date of treatment August 3, 2019.
- In Georgia, exemption from income tax will come into force on January 1, 2017 . Tbilisi Week (November 18, 2016). Date of treatment August 3, 2019.
- Bakhtadze: Most of the new tax reform is dictated by the initiative of our small entrepreneurs . Business Georgia (July 3, 2018). Date of treatment August 3, 2019.
- The Georgian taxation system - an overview (May 1, 2010). Date of treatment August 3, 2019.
- Mikheil Saakashvili pardoned Israeli businessmen . New region (12/02/2011). Date of treatment October 12, 2012. Archived December 14, 2012.
- Doing Business 2015 . The World Bank (October 29, 2014).
- Doing Business 2019 . The World Bank (October 31, 2018).
- Anna Tutberidze. The prime minister welcomed the adoption of the Act of Economic Freedom Parliament . Sputnik-Georgia (July 12, 2011). Date of treatment September 13, 2015. Archived October 18, 2015.
- Save it for old age: a funded pension system working in Georgia . Sputnik-Georgia (January 1, 2019). Date of treatment August 3, 2019.
- Economic reforms and a new approach to tourism - what awaits Georgia . Sputnik-Georgia (June 20, 2018). Date of treatment August 3, 2019.