PM Giorgi Kvirikashvili said on January 15 that the government will submit “in the nearest future” to the Parliament bill envisaging zero tax on reinvested profit.
“The government has started active work on tax liberalisation and we are actively considering introducing elements of the Estonian model, involving taxing only the distributed profit… That implies exempting companies from profit tax, if that profit is reinvested,” MP Kvirikashvili said at a government session on Friday morning. Estonia has had zero corporate taxes on reinvested profit since 2000.
“We are actively working on this with the IMF representation… and I think that it will be possible in the nearest future to discuss the draft at a government session and then send it to the Parliament for consideration,” Kvirikashvili said, adding that he is convinced that there will be support of opposition lawmakers as well on this issue.
Kvirikashvili first voiced this proposal in March 2015, when he was the Economy Minister. He said at the time that although it would have a negative short-term impact on state coffers, cutting tax revenues by several hundreds of millions of lari, in the long run it would boost economic growth.
The idea appeared to be shelved since then. Deputy Finance Minister Giorgi Kakauridze said in October, 2015 that the government would not hurry with this reform, adding that it was “quite a difficult process, fraught with quite a lot of risks.”
Georgia’s 2016 state budget sets targeted revenue from corporate profit tax at GEL 980 million, accounting for 12.3% of total forecasted tax revenues for this year.