Finance Minister, Kakha Baindurashvili, presented draft of the new tax code at a hearing of parliamentary committee on finances and budget on June 22.

Baindurashvili reaffirmed during the hearing that provision included in the draft envisaging introduction of additional taxation for print media was “a misunderstanding” and “a mistake”, which would definitely be corrected. He said the government had no intention whatsoever to impose additional taxes on the print media.

“It would have been inappropriate decision to tax the press in a condition when tax revenues from the press are less than tax revenues from a single ordinary company,” he said.

The government has revised its initial plan to cut income tax from 20% to 15% by 2013. According to the proposed draft of tax code the 20% income tax will remain till end of 2012 and it will be reduced to 18% starting from 2013.

In 2007 Parliament approved a government proposal, which went into force on January 1, 2008, replacing the 12% income tax and 20% social tax with a flat 25% income tax. Afterwards the government offered a five-year plan of gradual decrease of income tax, according to which in 2013 income tax should have been reduced to 15%.

Baindurashvili told lawmakers that the government had to revise this initially scheduled of cutting income tax because of current economic difficulties and global economic crisis. He, however, said this revision did not mean that the government was abandoning its policy in favor of keeping lower taxes.

With the new tax code, the government also intends to increase excise tax on alcohol. Excise duties will be doubled on ethyl spirit (reaching GEL 2.6 per liter), vodka (GEL 3 per liter), whisky (GEL 5 per liter), beer (GEL 0.4 per liter).

Excise duties on export of ferrous and non-ferrous metals will go up from current GEL 80 per ton to GEL 120.

Excise will be introduced for telephone communication services. An exact tax rate will be defined by the government’s decision within 10% limit of total turnover of telephone communication services in accounting period.

The Finance Minister told the lawmakers that the government still remained committed to its policy of low taxes and it had decided to target those sectors of economy, which enjoy with significantly high revenues.

With the new tax code the government also intends to impose value added tax on high education institutions.

The proposed draft introduces “micro business” category in which will fall those individual businessmen, whose annual turnover does not exceed GEL 30,000 (less than USD 16,000) and who do not use hired labor in their operations. “Micro businessmen” will be fully exempt of income tax.

Another category will be “small business”, which will include businesses with annual turnover of no more than GEL 200,000. Income of such businesses will be taxed either with 3% or 5%. 3% taxation will apply in case if “a small business” provides standard accounting documentation for at least 60% of their turnover (not counting staff salaries). 3% taxation will also apply to those “small businesses,” which operate in “special trade zones”, for example in outdoor markets, according to the draft.