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New Year, new taxes

By M. Alkhazashvili
(Translated by Diana Dundua)
Monday, December 31
From January 1, 2008, Georgian workers will pay a flat income tax of 25 percent.

Previously, Georgians employees paid a flat 12 percent tax on their income, while their employers paid a 20 percent “social tax” on each employee’s wage. Businesses will no longer pay a social tax.

The new tax scheme, proposed by then-president Mikheil Saakashvili in March of this year, is billed as an overall lowering of the tax burden. The combined tax rate of the income and social taxes were 32 percent, compared to the new income tax rate of 25 percent.

While critics say the tax burden is being shifted onto the shoulders of working Georgians, the government counters that employers will be able to raise salaries now that they do not have to pay the 20 percent social tax.

State employees, for example, will all receive raises in 2008 to offset the higher income tax.