On Thursday, November 26, on the initiative of the President of the Ukrainian Manufacturers Association Alexander Gromyko and the President of the Association of Seafood Importers Oleg Lushchik, a morning breakfast was held with the participation of People’s Deputies Mikhail Kobtsev (Kharkov), Gennady Chekit (Odessa) and Georgian reformers Georgy Arveladze (ex-minister Economics and ex-head of the presidential administration of Georgia, now president of the American University of Kiev) and Archil Mamatelashvili (ex-minister of energy of Georgia).
The discussion was devoted to a compromise between the two options for tax reform, which is currently being debated in the Supreme Rada.
Mikhail Kobtsev said that despite the great work carried out by experts and deputies led by Nina Yuzhanina, Prime Minister Yatsenyuk at a joint meeting on Wednesday was categorical that the parliament is obliged to adopt a government version of the tax reform. In all other options, the IMF allegedly will not provide Ukraine with the next tranche of the loan.
Georgy Arveladze told the story of how in 2004, despite the acute shortage of money in the budget, Georgia refused to comply with the IMF demand and went on a sharp tax cut. Without expecting such a demarche on the part of the Georgian leadership, the IMF published an internal report with a forecast of Georgia’s default in six months. Six months later, the IMF had to apologize and admit its mistakes in the calculations, since the tax reform led to a sharp filling of the budget and avalanche-like investments in the economy of Georgia from the business of many Western countries.
The economy of Georgia has grown 10 times over 10 years. But this economic miracle happened not only because of the reduction and simplification of taxes. At the same time, there was an uncompromising fight against corruption with the renewal of officials of all ranks. Tax officials worked honestly and with maximum automation, and business quickly got used to the fact that with the simplification of all procedures for business, with radical deregulation, a sharp liberalization of the banking sector and complete abandonment of state government by enterprises, working in the shade became more risky for business, Than to go out into the light.
The economy of Georgia with the invasive investments of billions of dollars no longer required any loans from the IMF and therefore the program of cooperation with them was quickly curtailed. It came to the point that the Georgian government was deciding what to do with its lari currency, which against the background of avalanche investments constantly strengthened against the dollar and thereby harmed exporters.
The third stage of tax cuts fell on the most difficult period for Georgia immediately after the war and the global crisis in 2009. Even the experienced economic experts of the Western countries saw us as crazy, “recalls George Arveladze with a smile. But the economy of Georgia continued its growth and this signal to investors did not take long. Investors continued to pour into the Georgian economy, thereby maintaining the GEL rate stable even during the global crisis.
“In the conditions of Ukraine, when there are two different versions of the tax reform, one should not allow any of them to be accepted as a result of a lengthy debate, therefore, the simplest option is to come to both sides to a compromise which is the Georgian version, which has been tested in practice (cf. See the table above), “says Arveladze.
