A group of twelve Georgian business associations, including the American Chamber of Commerce in Georgia and  the Association of Banks of Georgia, issued a statement on June 13, expressing their objections over possible removal of Article 94 of the Constitution, which allows the introduction and the increase of state tax (except for excise tax) only through a referendum.

“As far as we are aware, the possibility of removing Article 94 from the Constitution … is still being discussed as part of the planned constitutional amendments,” the organizations wrote. “We, the leading business associations, consider that keeping Article 94 of the Constitution in its current form is essential for economic growth and development, as well as for maintaining stable business and investment environment in the country.”

The business associations added the constitutional provision “guarantees the stability and predictability of fiscal policy,” making Georgia attractive for foreign investments and promoting the development of local entrepreneurship. 

“Maintaining the provision is extremely important against the background of current social-economic problems and the geopolitical challenges facing Georgia. The economic growth in the country is largely determined by foreign investments and investment activities of local entrepreneurs,” the organizations said, adding that the move would aggravate Georgia’s competitiveness in terms of investment attractiveness and reduce the country’s economic growth.

“Companies can invest in any of the countries of the region and the world, and the competition to this end, is increasing day-by-day. Georgia needs to offer unique and stable investment and business climate to the investor. If not that, it is unclear what competitive advantage Georgia has compared to other countries, including to those in the region,” the statement reads.

The organizations also note that Georgian citizens should themselves be able to decide on possible increase of their taxes. “The right of citizens to decide the issue of increasing taxes through a referendum is directly associated with their right to manage their own earnings,” they said.

Nine civil society organizations (CSOs), including the Transparency International Georgia and the Economic Policy Research Center, joined the business associations in speaking against the removal, saying “it is unclear why the ruling party has changed its position regarding this provision, considering the fact that previously the Parliament had repeatedly supported retention of this article in the Constitution.” 

“We believe that public involvement in deciding to increase taxes is directly linked with the accountability of the Government and the Parliament. The public must have the opportunity to participate in the decision to introduce a new tax or increase the upper limit of an existing one. The government must not have the opportunity to make such decisions single-handedly,” the organization’s June 14 statement reads.

The organizations said that the removal of constitutional restriction “will negatively affect the country’s attractiveness for investors and the predictability of its business environment,” and added the provision “must remain in the new Constitution, in order to preserve and increase Georgia’s economic growth and attractiveness of its business environment.”

The Social-Democrats for the Development of Georgia party, which has a six-member faction within the Georgian Dream-Democratic Georgia parliamentary majority group and which is one of the initiators of the removal, responded to the business associations in a statement on June 14, inviting them for discussions in the Parliament on June 19.

“Considering European and the general western constitutional practice and the traditional practices of representative democracy, we suppose that it is necessary to abolish Article 94 of the Constitution, since the provision considerably limits the responsibility and the obligation of the legislative body to define the country’s tax and economic policy,” the statement reads.

“We believe that a constitutional restriction should not become the basis for distancing the Parliament from the process of state policy making,” the party added. “The Parliament, the Government, the State should not be limited by constitution to pursue a flexible policy, which under various economic situations and challenges, should change in line with universal interests.”

The party also stated that the restriction has “no analogue in the constitutions of the countries with institutional democracy that confirms that the existence of this provision in our country’s constitution is undemocratic and unjustified.”