President Saakashvili said Georgia would negotiate with EU on Association Agreement in way so that not to harm Tbilisi’s intention to pass Act of Economic Liberty, which, he said, would be passed in autumn.
Saakashvili first proposed the Act of Economic Liberty in October, 2009, envisaging a referendum requirement on tax increases; ban of setting new regulatory agencies, as well as introduction of new licenses or permits; budget expenditure capped at 30%; budget deficit capped at 3% of GDP and public debt capped at 60% of GDP.
Some of the provisions of the proposal, however, are at odds with Georgia’s drive to have deep and comprehensive free trade agreement with EU.
Head of EU delegation in Georgia, Per Eklund, said in February, 2010 that Georgia would need to ensure that “with the Liberty Act in force, it will be able to undertake any necessary regulatory reforms to which it would commit under a future deep and comprehensive free trade agreement.” He also said that EU had received “positive assurance” from President Saakashvili on the matter.
Štefan Füle, EU commissioner for enlargement and European neighbourhood policy, said in May, 2010, that some of the ideas of “ultra-liberal economic environment” in Georgia were not in line with “pillars” of EU-Georgia future partnership.
One of the elements of the Liberty Act – a referendum requirement on tax increases – was passed by the Georgian Parliament with its first reading on December 25, 2009; but this constitution amendment has been shelved since then. The proposal, which requires to be passed with second and third reading, is binding the government to hold a referendum if it decides to increase income tax; profit tax; value added tax and customs tax or if the government decides to introduce a new tax.
International Monetary Fund (IMF) welcomed the Georgian government’s decision to postpone the implementation of a referendum requirement on tax increases, saying that it “will help maintain the necessary policy flexibility until the fiscal deficit has returned to more prudent levels.”
Asked whether the Liberty Act had been forgotten by the government, President Saakashvili said in an interview with the Georgian weekly magazine, Tabula, published on September 20: “We will pass it in autumn.”
“I am sure we will be able to negotiate with EU in manner so that not to significantly harm free economy… Today Europe itself is saying no to what we also might be afraid of – high taxes, broad expenses, excessive regulations and bureaucracy is gradually becoming past,” he was quoted in the same interview.
“Europeans are realizing that the state can’t endure role of a permanent nanny for a long. The global economic crisis hit a powerful blow to the project of social Europe. I think Europe will make more steps towards free economy and we will eventually meet somewhere in midway,” he said.
Meanwhile on September 20 President Saakashvili met with EU foreign policy chief Catherin Ashton and European Commission President José Manuel Barroso in New York on a sideline of UN General Assembly session.