During his public lecture at Humboldt University, the Prime Minister of Georgia, Giorgi Kvirikashvili, stated: "We [Georgia] are ninth in the list of countries with the lowest taxes in the world."
FactCheckverified the accuracy of the Prime Minister’s statement.
The World Economic Forum assesses the tax burden of countries through its Global Competitiveness Study. The competitiveness of a country is evaluated based upon 130 indicators. One of the indicators is the ratio of the tax burden to profit. According to the 2015-2016 Global Competitiveness Report (p. 176), Georgia held the ninth place (with 16.4%) among the 140 countries included in the study according to the ratio of tax burden to profit. Similar reports of 2013-2014 and 2014-2015 indicated Georgia’s ratios of 16.5% and 16.4%, respectively, where the country occupied the tenth position.
The World Economic Forum bases its study upon the data published by various authoritative organisations. Specifically, it uses the data published by the World Bank for the ratio of tax burden to profit. According to the World Bank, Georgia occupies the 13thplace by this indicator (see Chart 1).
Chart 1:
Ratio of Tax Burden to Profit
Source: World Bank
The difference in the ratings was due to the fact that the Global Competitiveness Study includes 140 countries whilst the World Bank published its data for 220 territorial entities. Hence, the positions of Georgia in the ratings are more accurately depicted by the data of the World Bank.
Along with the tax burden, the tax administration quality is also an important aspect to consider. This is relatively accurately measured by the World Bank’s study on the Ease of Doing Business which is published every year. According to this study, Georgia’s ratings for 2016 do not show an improvement with the country remaining in the 40thposition as in 2015.
According to the Tax Misery & Reform Index[1]published by Forbes in 2009, which is a summary of the percentages of marginal taxes in a country, Georgia held the fourth place after Qatar, the United Arab Emirates and Hong Kong.
Table 1 depicts the amount of taxes in Georgia and the changes in their percentages over time. It makes clear that tax liberalisation took place in Georgia from 2005 to 2009 with no significant changes having been made in that regard thereafter. The most important change since 2009 will be the new rules for collecting corporate tax which will be enacted on 1 January 2017 thereby making profit reinvested in business entirely tax-free. This reform will positively influence Georgia’s positions in the aforementioned ratings.
Table 1:
Trend of Tax Reduction in Georgia
| Number of Taxes | VAT | Income Tax | Corporate Tax | Social Tax | |
| 2003 | 22 | 20% | 12%-20% | 20% | 33% |
| 2005 | 7 | 20% | 12% | 15% | 20% |
| 2008 | 6 | 18% | 25% | 15% | 0% |
| 2009 | 6 | 18% | 20% | 15% | 0% |
| 2012 | 6 | 18% | 20% | 15% | 0% |
| 2013 | 6 | 18% | 20% | 15% | 0% |
| 2016 | 6 | 18% | 20% | 15% | 0% |
| 2017[2] | 6 | 18% | 20% | 0%-15% | 0% |
Conclusion
Georgia’s high positioning in the ratings by tax burden is due to the reforms undertaken from 2005 to 2009. No major reforms have been made in this field thereafter with the exception of the corporate tax reform of 2016.
According to the latest Global Competitiveness Report published by the World Economic Forum, Georgia occupies the ninth place in the world with its ratio of tax burden to profit at 16.4%; however, this study only includes 140 territorial entities. The analysis of the original source of the statistics (World Bank data) shows that Georgia holds the 13thplace in the world by the ratio of taxes to profit.
FactCheck concludes that Giorgi Kvirikashvili’s statement is MOSTLY TRUE.______________________ [1] FactCheck
was unable to find the studies for the following years.
[2] According to the acting version of the Tax Code of Georgia.
