ISET Economist Blog

The new draft law on amendments to the tax code of Georgia
Wednesday, 24 April, 2024

As the subject law emerged unexpectedly in the legislative sphere and was processed and approved at an accelerated pace, the ISET Policy Institute raises the following questions:

Objective: The explanatory card states that the proposed law aims to promote the transfer of assets from a foreign enterprise registered in a country with preferential tax treatment to Georgia and that this will be achieved by providing temporary tax benefits for such subjects and transactions. What is the overall objective – economic development of the country, facilitating inclusiveness, and the welfare of the population?

Procedure: What was the rationale for the adoption of this draft law at such an unusually accelerated pace, without any prior discussions? Section 'D' of the explanatory card states that "state, non-state and/or international organisation/institution, expert, working group" was not involved in the process of drafting the law;  The development of the draft law “did not consider the assessment of the organization/institution, expert, working group”, nor did it take into account the "experience of other countries in the implementation of laws similar to the draft law; review of the experience that was used as an example when drawing up the draft law, if such review was prepared". Under these circumstances, what expertise would the proposed law's authors, members of the Parliament of Georgia Paata Kvizhinadze, Anton Obolashvili, Irakli Kirtskhalia, Bezhan Tsakadze, Zaal Mikeladze, Irakli Zarkua, and Gogi Meshveliani, primarily relied on?

Strategic vision: The explanatory card clarifies that the draft law is unrelated to any government/state program or the action plan in the relevant field. Why was additional analysis not deemed suitable in such an instance?

RIA: Why was not a Regulatory Impact Assessment (RIA) done for the draft law, which is a best practice adopted in Georgia’s legislation and allows us to determine in advance what the expected cost or benefit of the implementation of the law will bring to the country?

International practice: Which countries have implemented and applied such an approach, and what outcomes, both positive and negative, have been achieved?

Beneficiaries: Who will be the beneficiaries of this proposed legislation and what advantages will it provide to the general population?

Risks: Have all potential risks and anticipated harms been clearly defined? (i.e. the danger of diminishing the efficiency of international transfers), 

Mechanisms: Which mechanisms would be employed to ensure that individuals subject to sanctions are not benefiting to receive benefits under this proposed legislation?

Reputation and the European agenda: How will this bill affect the country's reputation and its European agenda?

Entering into force: The proposed legislation stipulates that the amendments will take effect immediately upon publication. It states that “based on its purpose and content it does not require setting a later date of implementation.” On the contrary, would it not be necessary to allocate additional time and conduct a thorough analysis to address crucial questions, identify possible risks, and establish security measures to mitigate them?

Given the unresolved questions raised, ISET Policy Institute is of the opinion that the enactment of this legislation will have a detrimental impact on the country's image, reputation and prospects.

* * *

DISCLAIMER: ISET Policy Institute is an independent economic think-tank, Non-entrepreneurial (Non-commercial) Legal Entity and is not part of Tbilisi State University (TSU).  The content and opinions expressed by the ISET Policy Institute do not represent the views of Tbilisi State University.

The views and analysis in this article belong solely to the author(s) and do not necessarily reflect the views of the international School of Economics at TSU (ISET) or ISET Policty Institute.