Delivering a speech at the plenary session on 1 October 2013, representative of the Parliamentary Minority Mikheil Machavariani stated: “We inherited an economy which imposed 23 sorts of taxes and the heaviest tax burden while the economy we left behind has only five types of taxes. You can see for yourselves what sorts of countries Georgia has come close to in terms of low tax rates. Today, Georgia is the most attractive country to do business in. In 2003, we inherited a country which instructed 300 licenses, 600 permits and in 2012 we left behind a country with 92 licenses and about 52 permits. This constitutes roughly a 90-70% decrease... customs barriers were enormous in 2003, the importing of goods which on average required 52 days and the exporting procedures lagging for 54 days were slashed to four-to-five days.”

FactCheck

inquired about the accuracy of the facts indicated in the statement.

Based on the official data of the Ministry of Economy, prior to 2003, 21 taxes existed in Georgia which were cut down to six after the introduction of reforms. Of those, five are the general state taxes while one (property tax) represents a local tax. In accordance with the data published by Forbes

in 2009, Georgia is the fourth least tax burdened country in the world after Qatar, the United Arab Emirates and Hong Kong. Conceding that Machavariani refers to the taxation burden in his mentioning of low tax rates, the ranking of Georgia in this regard is indeed quite high.

On 23 October 2013, a new ranking was published in Doing Business 2013.

Pursuant to the report, Georgia takes the ninth position, out of the 185 countries, based on the ease of doing business in the country. The ranking is compiled by the International Financial Corporation and the World Bank. Being in the top ten by the ease of doing business and in the top five of the least tax burdened countries, Georgia can indeed be recognised as one of the most attractive countries in which to do business.

The cutback in the number of licenses and permits is confirmed by the data found on the website of the Ministry of Economy which asserts that in total the amount of licenses and permits has been reduced by 90%.This statement of Mikheil Machavariani echoes that of the former Prime Minister Zurab Noghaideli, made on 19 March 2010, discussing the Law on Licenses and Permits which went into force in 2005. Noghaideli remarked on the decrease of 900 units in the number of activities requiring licensing or a permit. Pursuant to the Law of Georgia on Licenses and Permits, Georgia presently retains 92 sorts of licenses and 52 permits.

The creation of the Customs Clearance Zones significantly contributed to the diminishing of trade barriers. The ordinance N989 of the Minister of Finance, Nika Gilauri, issued on 9 January 2008, introduced the automatised system, ASYCUDA. This system notably simplified customs procedures. In the case of all customs documents being in order, customs clearance lasts at most one hour. It is to be emphasised that prior to the establishment of Customs Clearance Zones, the clearance of goods lagged from one-to-two weeks.

Conclusion 

The first part of Mikheil Machavariani’s statement, regarding the reduction of taxes, is consistent with established facts as the taxes indeed saw a considerable decrease. Although, as a point of fact, the number of taxes has been cut from 21 (and not 23) down to six of which five are state taxes while one represents a local tax.

Considering that Georgia is the ninth country in the world based on the ease of conducting business and the fourth by low tax rates, we can certainly consider it attractive for doing business.

The 90% decrease in the number of licenses and permits was confirmed by the Ministry of Economy, reaffirming the statement of Mikheil Machavariani. The customs procedures are also considerably simplified as compared to those prior to the introduction of Customs Clearance Zones. The ASYCUDA programme minimised the time required for customs procedures. Notwithstanding the minor inconsistency between this point of Mikheil Machavariani’s statement and the facts revealed by our research, it is still more than obvious that the trade barriers have been diminished and the time required for the compulsory procedures has been reduced.

Accordingly, we conclude that Mikheil Machavariani’s statement: “We inherited an economy which imposed 23 sorts of taxes and the heaviest tax burden while the economy we left behind has only five types of taxes. You can see for yourselves what sorts of countries Georgia has come close to in terms of low tax rates. Today, Georgia is the most attractive country to do business in. In 2003, we inherited a country which instructed 300 licenses, 600 permits and in 2012 we left behind a country with 92 licenses and about 52 permits. This constitutes roughly a 90-70% decrease... customs barriers were enormous in 2003, the importing of goods which on average required 52 days and the exporting procedures lagging for 54 days were slashed to four-to-five days,” is MOSTLY TRUE.