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Liberty Act Restricting Freedom

Discussions of the constitutional bill is sharpening. Special regard is paid to the issue of sales of land to foreign citizens and article 94 (Liberty Act) that calls for conducting a referendum for introducing a new tax (excluding excise tax) or raising the existing rate, excluding the cases under the organic law.

At the same time, this record also makes it impossible to transform taxes, for example, introduce progressive taxes or others. The referendum may be held only on tax growth, not its transformation. At the same time, only government is authorized to appoint a referendum. Consequently, public involvement in this process is zeroed, in practice. We cannot control two regions of Georgia, which have been invaded. Consequently, it is impossible to hold legal referendum.

To cast light on the issue for our society, maintenance of article 94 in the basic law makes it impossible to introduce progressive taxes in the country (the poor pay less, the rich pay more), while this is one of the efficient mechanisms for eradicating inequality and poverty. Progressive tax is practiced in all developed countries, including the USA, Great Britain, Germany, France. It should be also noted that similar approaches have nothing common with left-wing views, especially with radical left-wing orientation. Over the past period, intensified steps by left-wing forces created harmful background for cancellation of this article. The picture is created as if radical left-wing forces demand for cancellation of this article with the aim to increase taxes. This is a lie.

According to this logics, then all the developed world will turn out to be following left-wing orientation. If this article is not removed from the basic law, according to current condition, only excise tax may increase, which is an indirect tax and population pay it. Its growth does not much concern high-income part of our society and it only hits the poor. Consequently, the current conditions protect major business and high-income citizens.

Last week major business sector representatives urged the Government to maintain article 94 in the basic law. In a special statement, the businessmen explained importance of this article. It was not surprising that major businessmen would object to removal of this article, because the existing tax policy provides comfortable environment for them as compared to small entrepreneurs.

The next day of the mentioned statement, several nongovernmental organizations also released statement.

“Our citizens should maintain the existing right – take decisions on introducing a new sort of taxes or raising the top margin of a tax.

Moreover, removal of the mentioned record should be negatively appraised in terms of investment attractiveness and business environment transparency. We believe it is of crucial importance to maintain this record  in the basic law for economic growth, attractive business environment and its development.

We hope that the Parliament will not back a removal of this record”, the statement signed by 8 NGOs reads, including Transparency International Georgia, Economic Policy Research Center, Community and Banks; Georgian Association of Reforms. It should be noted that only 3 mentioned NGOs are of economic profile.

Supporters of Liberty Act were responded by 25 objector organizations, including Social-Democrats for Development of Georgia, Banks&Finances newspaper, Association of Young Financiers and Businessmen, Auditorium 115 and so on. Members of the campaign – Constitution for Equality – No to Liberty Act invited Transparency International Georgia and other organization for open discussions.

Businessmen have also joined discussions around Liberty Act and applied even abusive expressions against each other.

“Restriction of the authority of tax administration was an act for developing normal social democracy in our country. Article 94 is an abnormal and unacceptable provision. There is no similar record in any other basic law. Permanent excession of norms by the Elites before 2012 cannot be a pattern for the Future. Many business companies have made excessive statements when opposing a removal of article 94.  Georgia is developed as a regional hub between China and Europe and flexible attitude is required for making state investments in infrastructure. Social programs in education, healthcare and pensions systems should be reformed if we plan to continue development as a high-income and high-technology economy”.

«Public development and economic development work together. This is European logics, experience and values. Business associations have made erroneous statement. Vake is not Georgia. I do not want to live in the country, where people do not receive normal salaries and education in regions.

When all business associations make statements in unison, something is wrong. We need new voice with European tone and values. We strive for Europe. Georgia must be an European country», David Li, businessman and director of European Business Association, wrote on his own Facebook page.

Fady Asly has released a response to David Li: «The most stupid analysis I have heard so far. If there was a Nobel Prize in stupidity, it would go to this statement that does not reflect reality at all», Fady Asly noted in his statement.

It is worth noting that  Venice Commission conclusion on the new constitutional bill will be published soon. Consequently, tensions intensify around this or that issue. According to backstage information, Venice Commission backs the idea of removal of article 94 and that’s why over the past period major businessmen and a part of NGOs have intensified their efforts to protect Liberty Act. It should be also noted that International Monetary Fund (IMF) has already applied to Government with a recommendation to remove the mentioned article. It is unclear what a decision Government will take, but the fact is that the existing taxation policy damages the poor and ensures comfortable environment for the rich. Therefore, the latter part will take all efforts to prevent a removal of article 94. However, i the government wants the taxation policy to meet modern challenges, Liberty Act must be removed from the basic law, because it restricts Freedom.

By Merab Janiashvili
Economic Analyst
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