On Economic Freedom

Organic Law of Georgia

On Economic Freedom

By the Constitution of Georgia and this Law, the citizens of Georgia establish guarantees of the economic rights and freedoms of present and future generations. Economic rights and freedoms are part of human rights and freedoms, the restriction of which shall be possible only in the manner and within the limits established by the Constitution of Georgia and law.

The State shall ensure economic rights and freedoms, which must be the basis for the development of society, the well-being of the people and the long-term, stable growth of the economy.

Freedom is the main principle of economic policy, which is manifested in a small government, responsible macroeconomic policy and low taxes.

Article 1. Participation of citizens of Georgia in the establishment of national taxes🔗

1. From the date of entry into force of this Law, the introduction of a new type of national tax, except for excise, or an increase in the upper limit of the rate existing for a type of national tax, except for excise, shall be possible only through a referendum, except for the case provided for by paragraph 6 of this Article. Only the Government of Georgia shall have the right to initiate the calling of a referendum. The introduction or amendment of a tax that is an alternative to an existing tax or replaces it and at the same time does not increase the tax burden shall not be considered the introduction of a new type of national tax or an increase in the ceiling rate. Also, a change in the tax rate within the ceiling rate existing for the type of tax shall not be considered the introduction of a new type of national tax or an increase in the ceiling rate.

1¹. Pension and insurance contributions shall be regulated by law and they shall not constitute taxes and fees.

2. As of the date of entry into force of this Law, the national taxes provided for by the Tax Code of Georgia are:

a) income tax;

b) profit tax;

c) value added tax (VAT);

d) import tax;

e) excise.

3. Property tax rates shall be established in accordance with the procedure determined by the Tax Code of Georgia.

4. A referendum on the matter referred to in paragraph 1 of this Article shall be held in accordance with the Organic Law of Georgia "On Referendum".

5. It shall be inadmissible for the subject of a referendum to be the principle of tax progressivity or the methodology/tax regime.

6. The Government of Georgia shall have the right to request a temporary increase in taxes — for a period of not more than 3 years. In this case, no referendum shall be held.

Organic Law of Georgia No. 3385 of 5 September 2018 – website, 24.09.2018.

Article 2. Establishment of the limits of macroeconomic parameters🔗

1. To ensure long-term and sustainable growth of the economy, the welfare of the population, and macroeconomic and fiscal stability, the following maximum limits of macroeconomic parameters are established:

a) The ratio of the deficit of the unified budget of the state, as determined by the Budget Code of Georgia, to gross domestic product – not more than 3 percent;

b) The ratio of the debt of the Government of Georgia to gross domestic product – not more than 60 percent.

2. For the purposes of this Law, the debt of the Government of Georgia includes:

a) state debt provided for by the Law of Georgia “On State Debt”, except for obligations assumed by the National Bank of Georgia;

b) debt existing in the form of loans of budgetary organizations, except for debt assumed from budgetary organizations.

3. The limit established by subparagraph “b” of paragraph 1 of this Article also takes into account the current value of obligations assumed within the framework of projects complying with the basic principles of public-private partnership and the criteria of public-private partnership provided for by the Law of Georgia “On Public-Private Partnership”.

4. In accordance with the procedure established by the legislation of Georgia, the elaboration of the draft law on the state budget, the adoption of the Law on the State Budget and the execution of the state budget shall be ensured in such a manner that the parameters of execution of the unified budget of the state correspond to the limit volumes established by paragraph 1 of this Article, both in the case of planned and performance indicators.

5. When submitting to the Parliament of Georgia the draft law on the state budget and when providing the annual report on the execution of the state budget, in accordance with the procedure established by the legislation of Georgia, the Government of Georgia shall submit information on the compliance of fiscal parameters with the limits established by this Law.

6. When reporting after the end of the budget year, in the event of violation of the limit indicators established by this Article (except for cases provided for by this Law), the Government of Georgia shall submit to the Parliament of Georgia, together with the annual report on the execution of the state budget, information:

a) on the reasons for violation of the limit volumes established by paragraph 1 of this Article;

b) on the progress of execution of the current year's state budget and, accordingly, on its impact on the parameters of the unified budget of the state, in the direction of their compliance with the limit volumes established by this Law.

7. Planning of the unified budget of the state beyond the limit volumes established by this Article and/or execution of the planned parameters may be possible:

a) in the case of the need to finance, in accordance with the procedure established by the legislation of Georgia, the declaration of a state of emergency or martial law and measures to eliminate the damage caused as a result of the said state;

b) in the event of an economic growth slowdown/recession − if, according to data published by the Legal Entity of Public Law − the National Statistics Office of Georgia, the real economic growth rate of the last 2 consecutive quarters, compared with the corresponding quarters of the previous year, is lower by 2 percentage points than the average real economic growth rate of the past 10 years.

8. In the case provided for by subparagraph „b“ of paragraph 6 of this Article, the Government of Georgia shall also submit to the Parliament of Georgia a plan for return to the parameters determined by this Law. The duration of the plan for return to the parameters shall not exceed 3 years.

Organic Law of Georgia No. 4019 of 14 December 2018 – website, 25.12.2018.

[Article 2¹. Establishment of energy independence parameters

The amount of electricity annually produced from renewable energy sources shall exceed the amount of locally consumed electricity. (shall enter into force from 31 December 2030)]

Organic Law of Georgia No. 4296 of 27 June 2024 – website, 04.07.2024.

Article 3. Principle of universality of the budget🔗

The disposal of taxes paid into the budgets of the State and municipalities shall be effected in accordance with the principle of universality of the budget, which implies the following:

a) all revenues of the budgets of the State and municipalities shall be directed to financing the budget expenditures, including that the revenues received by a budgetary organisation shall be directed in the respective budget to financing general expenditures, except where the organisation is a Legal Entity of Public Law;

b) it may not be established by the legislation of Georgia that a specific revenue of the budget be directed to financing a specific expenditure of the budget. This restriction shall not apply to financing provided by a donor which provides for a different principle of financing.

Organic Law of Georgia No. 6856 of 15 July 2020 – website, 28.07.2020.

Article 4. Freedom of movement of capital🔗

1. It shall be inadmissible to restrict the freedom of resident and/or non-resident persons in connection with currency conversion, the opening of an account of any kind, or the movement of funds in such an account, except in the cases provided for by the legislation of Georgia.

2. Any person shall have the unrestricted right to take funds outside the borders of Georgia, except in the cases provided for by the legislation of Georgia.

3. The movement of capital in Georgia shall be free, except in the cases provided for by an international treaty and agreement of Georgia or in the case where the movement of capital is related to criminal liability.

Article 4¹. Term of validity of paragraph 1 and 1¹ of Article 1 of this Law🔗

Paragraphs 1 and 1¹ of Article 1 of this Law shall be in force for 12 years from the entry into force of the Constitutional Law of Georgia of 13 October 2017 No. 1324-rs "On Amending the Constitution of Georgia".

Organic Law of Georgia of 5 September 2018 No. 3385 – website, 24.09.2018.

Article 5. Entry into force of the Law🔗

This Law shall enter into force from 31 December 2013.

Organic Law of Georgia of 5 September 2018 No. 3385 – website, 24.09.2018.

President of Georgia M. Saakashvili

Tbilisi,

1 July 2011.

No. 4979-rs