On 15 May 2015, whilst meeting foreign businessmen, the Prime Minister of Georgia, Irakli Gharibashvili, stated that according to the Forbes rating, Georgia holds the 4th

place in the world by simplicity of taxes and is behind only Qatar, the United Arab Emirates and Hong Kong.

FactCheck

took interest in the accuracy of this statement.

It appears that the Prime Minister was talking about the Tax Misery & Reform Index

compiled by Forbes. This index shows the percentage sum of the marginal taxes in a country. Six major taxes are included in the research:  profit tax, personal income tax, wealth tax, social security tax for employers and employees and VAT.  In this sense, Georgia does indeed fall behind only Qatar, the United Arab Emirates and Hong Kong.

From the aforementioned six taxes, only one, profit tax, is active in Qatar and amounts to 12%. The United Arab Emirates uses only social security taxes at 13% and 5%.  Profit (16%), income (15%) and social security (5%) taxes are active in Hong Kong. As for Georgia, we have profit (15%), VAT (18%) and income (20%) taxes only.

It should be noted that this rating was published in 2009. FactCheck

was unable to find a document newer than this 2009 research. Hence, it would appear that the statement of the Prime Minister is based upon the 2009 data.

Table 1:

Decrease in Taxes from 2003 to 2009

2003 2004 2005 2008 2009
Number of Taxes 22 22 7 6 6
VAT 20% 20% 20% 18% 18%
Income Tax 12%-20% 12%-20% 12% 25% 20%
Profit Tax 20% 0% 15% 15% 15%
Social Security Tax 33% 33% 20% 0% 0%

It should be pointed out that the decrease in the amounts of certain taxes, including the profit and income taxes, was planned in 2013. It was also planned to abolish the dividend and interest rate taxes. However, after the new government assumed office, no changes have been made to the taxes and they have not been decreased. Furthermore, some of the taxes even increased in 2013 and 2014. FactCheck wrote

about this earlier in the year as well. Specifically, excise taxes on alcohol and tobacco increased. Of note, however, is that the tax burden (the ratio of taxes to the GDP) kept decreasing in 2013 and 2014; however, according to the 2015 state budget plan, it will increase again from 24.8% to 25.2%.

According to the 2014 Simplicity of Taxes rating, compiled every year by the World Bank, Georgia held the 38th place among the 189 countries of the world in 2013. According to the same rating published in 2008, Georgia held the 102nd

place in 2007. Of mention is that the aforementioned rating is compiled based upon the data of the previous year. The World Bank’s research is different from that of Forbes by the fact that it includes taxes other than the major ones (excise and property taxes) as well as the simplicity of various bureaucratic procedures. When talking about the simplicity of taxes, it is more advisable to use the World Bank ratings.

Of further note is the fact that representatives of the Georgian Dream coalition government initially used to question the international ratings. One of the examples of this approach was the statement made by Bidzina Ivanishvili in Davos. FactCheck wrote

about this and another similar statement as well in an earlier article. However, this trend has changed over time. Today, the government pays a lot of attention to the international ratings and often quotes them, which is welcome news. Such ratings provide potential investors with useful information about the country and can positively influence their decisions.

Conclusion According to the Tax Misery & Reform Index compiled by Forbes, Georgia holds the 4th place in the world after Qatar, the United Arab Emirates and Hong Kong by the sum of marginal taxes. It should be pointed out that this rating was published in 2009. Taxes were on the decrease in Georgia until 2009. Taxes have not been decreased since that year. According to the rating published by the World Bank, Georgia holds the 38th

place in the world by simplicity of taxes. When talking about the simplicity of taxes, it is more advisable to use the World Bank ratings.

FactCheck concludes that Irakli Gharibashvili’s statement is MOSTLY TRUE.

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