BUSINESS
IMF names Georgia’s tax reform as one of the most effective in the world
12 March, 2018
The IMF (International Monetary Fund) names Georgia among the top 5 countries that implemented the most effective tax reform, according to the International Monetary Fund’s new report: Balancing Act: Managing the Public Purse.

The report stresses successful reforms between 2004 and 2015 in five low-income and emerging market economies, which have achieved some of the largest revenue gains after tax reform, including Cambodia, Georgia, Guyana, Liberia and Ukraine.
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The report includes Cambodia, Georgia, Guyana, Liberia and Ukraine

“We focus here
mainly on Georgia. By analyzing what worked in that country we can draw lessons for what strategies other countries should consider”, the author of the report, Bernardin Akitoby, said.

The International Monetary Fund notes that after the collapse of the Soviet Union, mobilization of taxes was one of the problems Georgia faced. In this period, due to corruption, the government could not cover low pensions and salaries of the public servants.

The IMF notes that reforms have started after the 2003 Rose Revolution in the country.
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The main reason of the success can be found in Georgia’s 2004 tax reform

The main reason of the success can be found in Georgia’s 2004 tax reform, which simplified the tax system, reducing rates and eliminating a series of minor local taxes that had been generating little revenue.

The government also made it easier to pay taxes by introducing electronic measures. As a result, new technologies improved efficiency and reduced opportunities for corruption.

According to the IMF, the measures to fight corruption are also opening up new opportunities for private companies.
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“Georgia offers a striking example of successful tax revenue reform,” writes author of the report., Bernardin Akitoby.

“Progressive personal income tax rates (12 to 20 percent) were replaced with a flat rate of 20 percent, and the social security contribution tax rate was first reduced from 33 to 20 percent and then eliminated altogether. Only 7 of 21 taxes remained. Corporate income was taxed at a flat rate of 15 percent, and VAT was reduced from 20  to 18 percent. The revenue lost from lower tax rates was made up through a broader tax base, better compliance, and stricter enforcement,” reads the report.

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