The government will elaborate amendments to the tax code, envisaging reduction of combined social and income taxes and profit tax, by the end of April, Prime Minister Zurab Nogaideli told the government session on March 21.
President Saakashvili proposed in his state of the nation address on March 15 to reduce profit tax from the current 20% to 15%; also to combine the 12% income tax and 20% social tax and reduce the rate of combined tax to 25% starting from 2008. It means that an average-weighted rate of combined tax will reduce by 2% from the current 27%.
PM Nogaideli said that the government launches consultations with the business circles about the initiative, which as he said, will significantly ease tax administration.
Although the President?s initiative to reduce profit tax was met with widespread praise, proposal to combine social and income taxes was perceived with skepticism by some opponents.
Opposition Republican Party leader Davit Usupashvili warned that this latter proposal will hit middle-class employees, who currently pay 12% income tax from their salaries, but will have to pay 25% after combination of income and social taxes. It is not yet clear how the government plans to tackle this concern, or how the proposal will be reflected in the final draft of the amendments in the tax code.
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