The recent amendment to Georgia's tax code, known as the "offshores law," has sparked significant concern regarding the integrity of Georgia's financial system. This policy brief examines the implications of this amendment in the context of Georgia's recent political and regulatory developments, which have raised alarms about potential risks of money laundering and sanctions evasion.

The tax code amendment incentivizes the relocation of assets from tax havens to Georgia. An analysis of foreign direct investment dynamics from offshore jurisdictions reveals that such investments often involve high turnover and short-term financial manoeuvres rather than contributing to long-term economic growth. This mostly does not translate into sustainable development or job creation, thus raises concerns about the true economic rational of attracting offshore capital into the country. Additionally, this could be risking country’s reputation by potentially facilitating the inflow of dubious capital, exploiting Georgia’s financial system to circumvent international sanctions.

Furthermore, this policy shift in Georgia occurs in a context where global initiatives aim to combat offshore financial malpractices. In light of these concerns, the amendment to the tax code could potentially violate international standards, such as the OECD's BEPS Actions and FATF recommendations, by creating a favourable regime for tax avoidance and undermining due diligence efforts. In summary, even if the stated intent behind Georgia's tax code amendments might be to boost foreign direct investment, the associated risks and negative perceptions far outweigh the potential benefits and the policy brief recommends abolishing the law in the best interest of the country.