OCT. 5 2015, TBILISI (The Conway Bulletin) — Signalling that a regional economic crisis is worse than it had thought, the Georgian finance ministry said it would scrap a flagship policy that would have cut corporation tax and encouraged business growth.
The Georgian Dream government said earlier this year that it wanted to copy an Estonian tax policy that scrapped corporation tax on profit re-invested into businesses in order to generate more growth. The downside was that, in the short term at least, tax receipts would also drop.
And now, at a meeting to discuss the government’s proposed budget for 2016, deputy finance minister Giorgi Kakauridze said that plans to introduce the tax cuts this year had been pushed back indefinitely.
“This is quite a difficult process, fraught with quite a lot of risk,” media quoted Mr Kvirikashvili as saying. “Yes this [model] has its positive sides, but there are lots of negative aspects as well, so it has to be thoroughly considered. No final decision has been made in which direction this reform will go.”
The bottom line is that Georgia’s budget relies heavily on corporation tax. To cut this tax now, with the economy worsening, would be fool- hardy, the government appears to have decided.
Analysts, though, were scathing and said the tax reform should never have been discussed in the first place.
“It is not the first time Georgian Dream has promised changes they’re unable to keep. They should have known that the economic crisis would make this reform a bad idea.” said Giorgi Aptsiauri, economist at the Georgian Institute of Politics. “Income from corporation tax is a large part of the budget. They can not afford a cut in revenue with the current economic situation.”
ENDS
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(News report from Issue No. 251, published on Oct. 9 2015)