Publication: Eurasia Daily Monitor Volume: 1 Issue: 125

The Georgian parliament and public are deeply divided about a government-proposed tax amnesty. The most controversial part of the bill, which focuses on “undeclared taxation duties and property legalization,” is the list of affected taxpayers. During the October 27 cabinet meeting, President Mikheil Saakashvili asked the parliament to approve the tax amnesty “without lengthy discussions and hullabaloo.” But parliament rejected the bill in its first reading on November 9, when members of the ruling party’s parliamentary majority joined opposition groups in opposing the bill in its present form.

The government and parliamentary committee for finance and budget, which is championing the bill in the legislature, have now backtracked and agreed to revise the bill.

According to the bill, law-enforcement officials and state auditors will no longer check economic activities begun prior to January 1, 2004, nor will they investigate the origins of the declared property and funds. After the bill is signed into law, affected citizens will have to submit property and financial declarations by the end of 2005 and make a one-time payment of 1% of the declared property value. This payment will effectively legalize ownership of those taxed properties. According to the bill, the amnesty will not be applicable to individuals who have already been ordered to pay tax arrears or against whom criminal charges have already been filed, as well as persons suspected of terrorism, arms smuggling, or drug trafficking.

The government claims that the legislation is necessary for it to keep the promise, made immediately after the Rose Revolution, to eliminate the previous government’s corrupt system. Furthermore, the bill should prevent capital flight by allowing “hidden money” to be invested in the national economy. “Each citizen of Georgia, as well as foreigners, will have a chance to legalize their property or finances in Georgia and make investments to further develop their business,” Prime Minister Zurab Zhvania said at the October 27 cabinet meeting.

Parliamentary chair Nino Burjanadze described the bill as “revolutionary,” and said that the government had indulged tax evaders in order to create a business-friendly environment boost and investments. However, this would be the last concession to them, she warned. Burjanadze said that the authorities could no longer ignore the actual situation in the country.

Perhaps these very realities, about which the government usually keeps silent, prompted the authors of the bill to draft it in such a way that the amnesty would include officials that have become rich by abusing their office. Sources say that Saakashvili and his team are indebted to many such people who either stood neutral during the Rose Revolution or covertly helped it. Many analysts have interpreted the breadth of the proposed tax amnesty as the government’s attempt to ingratiate itself with the corrupt bureaucracy, which still possess huge financial resources and other levers of influence.

On November 10, Koba Davitashvili and Zviad Dzidziguri, legislators from the recently created conservative opposition, told a briefing that the bill actually protects the interests of dishonest officials who had served as the government’s informal cash register after the Rose Revolution and now want to legalize their illicitly earned property. The MPs identified several shady officials and bankers who had transformed from former president Eduard Shevardnadze’s lackeys into Saakashvili followers. Davitashvili even named Zhvania as one potential beneficiary of the amnesty. According to Davitashvili, a former political secretary of the National Movement and close ally of Saakashvili, the tax amnesty in its present form runs counter to the contract that the National Movement concluded with the Georgian nation before the local elections in 2002 and that promised to deprive corrupt officials of their illegally earned property. Symptomatically, the parliamentary committee for legal affairs, dominated by Saakashvili’s supporters, has denounced the bill and stated clearly that amnesty should not apply to officials.

Some leading NGOs traditionally considered as Saakashvili’s representatives in the civil sector consider the tax amnesty as a timely political move, but nevertheless demand that state officials be exempt. Levan Ramishvili of the Liberty Institute said that the adoption of the bill in its current form would void existing anti-corruption laws, which require the government to confiscate the assets of officials who cannot prove the legitimate origin of those assets.

Analyst Vakhtang Khmaladze argues that the bill contradicts the international convention about money laundering, which Georgia joined last year. Nodar Natadze, chair of the People’s Front, says that so long as Georgia retains its 18% VAT and expensive energy, the national economy will still remain stagnated and even “legalized” capital would still flee abroad.

(Imedi TV, Civil Georgia, October 27; 24 Hours, November 3-4; Civil Georgia, November 8; TV-Mze, TV-Rustavi-2, November 9-10; Resonance November 1, 6, 10).