Personal income tax will no longer be reduced from current 20% to 18% next year and further to 15% from 2014, according to draft of amendment to the tax code passed by the Parliament with its first hearing on May 22.

The proposal instead envisages introduction of a scheme for “voluntary personal savings system”, administered by “asset management companies” to invest funds in various projects.

The current tax code, which went into force in 2011, envisages reducing personal income tax from existing 20% to 18% starting from 2013.

The proposed amendment, passed by the Parliament with its first reading, envisages keeping the current rate, but offers taxpayers to voluntarily divert 2% of their 20% income tax to savings fund, regulated by a separate law, which was also passed by the Parliament with its first reading on May 22.

According to the proposal the central bank will be in charge of licensing and overseeing “asset management” firms, which will be joint stock companies. Contributors to the saving fund will be able to withdraw their contributions after fifteen years. Gia Khuroshvili, the government’s parliamentary secretary, told lawmakers that contributors to the fund would be able “to control in which economic projects their money will be invested.”

Personal income tax collection totaled GEL 1.4 billion in 2011 and this year’s state budget targets GEL 1.56 billion.

The opposition lawmakers are skeptical about the proposal. Lawmakers from the Christian-Democratic Movement (CDM) have called on the authorities to allow diverting of 2% from the income tax to pension fund. A lawmaker from the Unity for Justice faction, Jondi Bagaturia, slammed the proposal as an attempt “to cheat” taxpayers and claimed that the authorities wanted to divert public funds to government-friendly businesses.