Parliament passed on December 25 with its first hearing with 111 to 2 votes a constitutional amendment binding the government to hold a referendum if it decides to increase taxes or introduce a new tax.

The proposal is part of a package known as Act of Economic Liberty.

President Saakashvili told the Parliament in October that the package would “restrict the executive branch of the government to turn away from the course of liberal economy” and had “an ambition to turn Georgia into a real flagship of the world liberal economic ideology.”

A separate draft of legislative bill, in frames of this Act, specifies and defines, among other things, tax referendum details. This draft law on Economic Freedom, Opportunity and Dignity, which the Parliament has yet to discuss, envisages holding of a referendum if the government decides to increase income tax; profit tax; value added tax and customs tax. Property tax and excise tax does not fall under the category.

The draft law, if approved, will set maximum ratio of budgetary expenditures to GDP at 30%; budget deficit – at maximum 3% of GDP; and maximum of 60% of debt-to-GDP ratio.

The draft law also restricts the government’s right to introduce additional new licenses and permits.

Lawmakers from the parliamentary minority said during the debates on December 25 that the proposed constitutional amendment was “a populist” move on the part of the authorities.

MP Giorgi Targamadze, the leader of Christian-Democratic Movement (CDM) and of parliamentary minority, said that the authorities should instead take tangible steps for improving business climate in the country.

“No one will be deceived with this [constitutional amendment]; everyone knows about burdens that the tax services create for the businesses,” MP Giorgi Targamadze said.