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MPs to Pass New Tax Code in September
Civil Georgia, Tbilisi / 16 Jul.'10 / 20:24

Parliament will approve draft of new tax code with its third and final hearing in September, while its discussion with a second hearing is planned for July 21, Georgian Parliamentary Chairman Davit Bakradze said on July 16.

The draft, which is scheduled to go into force starting from 2011, was passed with its first reading on June 29.

The Parliament initially planned to discuss the draft with its second hearing on July 16, but it was postponed as a result of agreement between the Parliament and the government, citing the need for further consultations on certain issues.

Meanwhile, a group of civil society organizations called on the government and the Parliament to consider keeping preferential income tax rate for non-governmental organizations. Currently income from grants for NGOs is taxed with 12% rate.

The fact that this preferential system would have been scrapped starting from 2011 was known well before the draft of new tax code was proposed.

But the problem, highlighted by the group of NGOs, is that originally the government planned to cut 20% income tax to 18% starting from 2011 – meaning that income tax applied for grants of NGOs would have been increased to 18%. But the government has rescheduled cutting of the income tax and according to the draft of new tax code the rate would remain 20% till end of 2012; it will go down to 18% starting from 2013 and the rate will be kept till January, 2014, according to the draft. The draft does not specify what the rate will be starting from 2014. The initial plan envisaged having 15% income tax starting from 2013.

Hence, the proposed draft means that income tax for NGOs would be 20% instead of expected 18%.

In a statement the group of NGOs called on the authorities to extend to preferential system of taxation for the sector for three more years, saying that increase of income tax to 20% may hit the civil society organizations’ operations.

Leader of parliamentary majority, MP Petre Tsiskarishvili, said on July 16, that although the authorities deemed “the work of NGOs as very important in the process of civil society building,” he believed there should be equal taxation for all the sectors and it would be “unfair” if employees of other sectors paid more than those working for NGOs.

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