constitutional law of Georgia on additions to constitution of Georgia
Article 1. Constitution of Georgia (Official Gazette 1995, #31-33, Art. 668) shall be amended as follows:
1. Article 93 shall be added with Clause 9 as follows:
"9. To ensure a stable long-term economic growth the macroeconomic parameter thresholds and fundamental principles of the economic policy are defined with the Organic Law of Georgia."
2. Article 94 shall be added with Clause 4 as follows:
"4. Introduction and increase of overall state taxes, along with the addition or extension of a taxation subject shall be possible only through a referendum, the initiative for announcement of which may be exercised by the President of Georgia."
Article 2. The present Law shall be enforced upon its publication.
President of Georgia
ORGANIC LAW OF GEORGIA
ON ECONOMIC FREEDOM, OPPORTUNITY AND DIGNITY
Citizens of Georgia shall define the guarantees and major principles of economic policy for the economic rights and freedom of present and future generations under the Constitution of Georgia and the present Law. Economic rights and freedom are the integral part of widely accepted human rights and freedoms. Restriction of such rights and freedom is possible only with the Constitution of Georgia and the within the rules promulgated in the present Law. The state provides for economic rights and freedom, which shall be the basis for the public development, well being of the society and consistent long-term growth of the economy. The present Law defines the major principles of the economic policy, which sets the basis for benefiting from the broader economic opportunity and dignified life. Freedom, opportunity and dignity are the major principles of the economic policy and have the following meanings:
a. Freedom is expressed by the small scale of Government interventions, responsible macroeconomic policy, low tax rates, protection from state interventions and bureaucratic discretion;
b. Opportunity is based on legality, freedom of labor and quality education, as a result of which high social mobility of a person is achieved;
c. Dignity is ensured through state support based on the assessment of opportunity aimed at those who can not adequately benefit from freedom and opportunity.
The principles of this Law are also based on European values and aspirations, manifested in free movement of goods, persons, servicies and capital, and are aimed at economic integration of Georgia in this space. Article 1. Rights and Freedom Guarantees 1. The following are ensured and guaranteed for all:
a) Decision-making on the introduction and/or increase of overall state taxes;
b) Unlimited economic and entrepreneurial activities;
c) Freedom of will in labor relations;
d) Free movement of money;
e) Freedom of price-setting;
f) Free trade;
g) Property rights and its inviolability.
2. Taxes and/or collectables to the state and local budgets of Georgia are recorded in full and thereby provide for the public access to information on expenditure of levied taxes and/or collectables. Article 2. Rights of the Georgian Citizens to Restrict Overall State Taxes 1. From the enforcement date of the present law:
A) New overall state taxes may be introduced only through a referendum;
B) Increase of the current overall state tax rates may only occur through a referendum;
C) Changes to income and profit taxes are prohibited if they will apply to the taxpayers in a differentiated manner;
D) Extension of the current overall state taxation base and addition of a new taxation subject may only occur through a referendum;
E) Initiative on announcement of a referendum as provided for under Clauses A, B and D of the present Article may be expresserd only by the President of Georgia.
2. By the enforcement date of the present Law the overall state taxes envisaged in the Tax Code of Georgia are as follows:
a) Income Tax;
b) Profit Tax;
c) Value Added Tax (VAT);
d) Customs Tax;
e) Excise Tax.
3. Property tax rates are set under the rules defined in the Tax Code of Georgia. 4. Referendum on the issues referred in Clause 1 of the present Article is held in line with the Law of Georgia On Referendum. 5. It is prohibited to hold a referendum on the introduction of a tax with a progressive principle. 6. Provisions made in Clause 1 of the present Article do not apply to excise taxes. Article 3. Delienation of Limits to Macroeconomic Parameters 1. To ensure public well being through a long-term economic and stable growth and to facilitate the transfer of country with decreased financial liabilities for management to future generations the following ceilings of macroeconomic parameters are defined:
A. Correlation of a consolidated budget with GDP - no higher than 30%;
B. Correlation of a consolidated budget deficit with GDP - no more than 3%;
C. Correlation of public debt with GDP - no more than 60%.
2. It is not permitted to have the budget approved by the Parliament of Georgia in excess of the ceilings set in Clause 1 of the present Article. 3. If the ceilings defined in Clauses 1A and/or 1B are breached the Government is obliged to develop and submit for approval to the Parliament of Georgia a plan to revert to the thresholds defined in Clause 1 of the present Article with average indicators of the budgets earmarked for the breached and the immediately following three years. Draft 3
4. Parliament of Georgia approves the plan submitted by the Government provided the requirements of Clause 3 of the present Article are met. 5. Plan referred to Clause 3 of the present Article should incorporate the obligatory reduction of the budget earmarked for the year immediately following the threshold breach to the levels within the ceilings envisaged in Clauses 1.A and 1B of the present Article. 6. Budget formation for the state, autonomous republics and local self-governance bodies should occur in line with the aims and goals of the programmes. Article 4. Principles Based on Universal Nature of Budget 1. Management of taxes collected to the state and local budgets of Georgia is based on the universal principle that implies the following:
a. All the revenues to the state and local budgets should be targeted at financing the budget expenditures, including the revenues of budget organizations, which are directed at financing the relevant expenditures of the applicable budgets;
b. It is not permitted to define with legislation that a particular budget revenue be directed at financing a particular budget expenditure except the revenues generated on the grounds of agreements convened with International Financial Institutions (IFIs).
Article 5. Freedom of Labor 1. Labor Agreement is a result of free expression of will made on the grounds of equality between the parties involved. 2. Any type of pressure over the free expression of will by an employee and/or employer or restriction of this right are prohibited except under the specifically defined terms and conditions of international conventions ratified by Georgia and/or cases envisaged under the Georgian legislation by the enforcement date of the present Law. 3. Employee and/or employer have the right to protect their own rights both individually and collectively, and it is prohibited to restrict this right. 4. Employee and/or employer have right to protect their own rights both directrly and through a representative. 5. It is not permitted to assign under the Georgian legislation any priority right on protection of employee and/or employer rights to an individual or a group of people. 6. Discrimination is prohibited in labor relations, including in the cases of recruitment and termination of employment, also on the grounds of membership to any groups (associations). 7. Employees and employers shall decide themselves which physical or legal entity and/or union shall represent their interests and restriction of this right is not permitted. Article 6. Freedom of Capital Movement 1. It is not permitted to restrict the free movement of capital. 2. It is not permitted to restrict freedom of resident and/or non-resident entities in terms of currency exchange, opening any kind of bank account or financial turnover within it. 3. Any person has the unrestricted right to repatriate money. Draft 4
4. Movement of capital is free in Georgia provided it is not associated with criminal charges. Article 7. Prohibition of Restrictions Over Freedom of Economic Activities and Extension of Regulated Fields 1. Types of licenses and permits currently being in effect in Georgia along with the applicable obligations which imply the application of contextual license or permit regimes on any economic activity should not exceed the total number of licenses and permits existing under the Georgian legislation by the enforcement date of the present Law. 2. If the number of restrictions under Clause 1 of the present Article equals the total number of licenses and permits promulgated under the Georgian legislation by the enforcement date of the present Law the new licences and/or permits types may only be introduced if current ones are abolished, while the initiator of the applicable draft law should justify which license and/or permit should be abolished to substitute it with the recommended one(s). 3. From the enforcement date of the present Law it is prohibited to extend the coverage and/or terms and conditions towards tightening of the current licenses and/or permits. 4. It is prohibited to introduce an obligation, which envisages the application of licence or permit regime in a contextual manner over any type of economic activity or action, while if such obligation exists by the enforcement date of the present Law it should either turn into a licence/permit or be abolished. 5. In all the relevant cases the Government of Georgia shall submit to the Parliament a list of licence and permit types along with such restrictions that imply the application of licence or permit regimes in a contextual manner over any economic activity or action. 6. In cases when the number of licences, permits and other types of restrictions presented in the submitted list exceeds the quantity envisaged in Article 7.1 of the present Law the Government shall develop a package of legislative amendments to be approved by the Parliament with an aim of honoring the provisions laid out in Article 7.4 of the present Law. 7. Public institutions are prohibited to set prices/tariffs on any type of goods/services and exercise control over them. 8. It is prohibited to create/have in existance such national independent regulation or other type of body, whose competence involves price and or tariff setting over goods and services, except the current scope of competences defined for existing regulators by the enforcement date of the present Law. 9. The state is prohibited to own or have title ownership over a commercial bank share and/or equity in other financial institutions. 10. If the state has aquired the right restricted under Clause 7 of the present Article it is obliged to transfer it within a year. Article 8. Restriction of Economic Freedom and Public Expenditure Control in Legislative Process 1. It is not permitted to pass/issue the by-laws regulating such entrepreneurial activities, which are not cost-efficient, lead to additional expenditures related to legislative requirements, jeopardise the development of liberal entrepreneurship and creation of new jobs. Draft 5
1. Preliminary assessment of potential impact of legislative initiatives over the economic activities is aimed at facilitating the improvement of the business climate, identification of draft by-laws with a potential of negative impact and prevention of their adoption, along with the reduction of regulation burden on private sector and cost of relevance. 2. Preliminary assessment of potential impact of legislative initiatives over the economic activities is carried out with a special methodology, which implies the expertise analysis of by-laws towards measuring the impact on regulation environment and includes the following:
a. Cost Analysis - assessment of a draft by-law towards measuring the volume of budget funding allocations for its enforcement;
b. Regulation Burden Analysis - assessment of direct and indirect expenditures to be incurred for compliance with the law;
c. Restricted Competition and Placement in Competition-Free Position Analysis - assessment of placing individuals in unequitable position.
3. Preliminary assessment of potential impact of legislative initiatives over the economic activities is composed of primary and comprehensive expertise analysis in relevant cases. 4. If after the primary expertise analysis it is identified that potential is high for extending the regulation burden and/or restricted competition the draft shall be subject to comprehensive expertise analysis towards the issues envisaged under Clauses 2.B and 2.C of the present Article. 5. If after the expertise analysis it is identified that the draft apart from the Law of Georgia On State Budget leads to additional expenses the initiator is obliged to indicate the source of funding from amongst the various line items of the State Budget, which shall be used in full or partially to finance the legislative initiative concerned. 6. Preliminary assessment of potential impact of legislative initiatives over the economic activities is carried out in view of the following:
A) Draft Laws initiated by the Government of Georgia with applicable procedured to be defined with a Government Decree according to which the said initiatives shall be assessed and the findings shall be attached to the draft law for discussion at the scheduled Executive Government Meeting;
B) By-laws submitted to and initiated by the Parliament which shall be supplemented with a Government Opinion formulated for the amendments to the Law On By-Laws and Parliament's regulament in the form of Explanatory Notes and the Parliament shall consider the Opinion along with the submission.
Article 9. Right to Tariff and Technical Barrier-Free Liberal Trade 1. If technical regulations and standards of other countries or international organizations that have been declared by Georgia are applicable to same sectors along with domestic technical regulations and standards the interested individuals may choose which one of them shall be applied. The state has no right to directly or indirectly grant preference to any technical regulation and/or standard. 2. If international technical regulations are declared or deemed as equivalent the administrative bodies shall not develop any domestic analogues except the cases when for the sake of protecting the public economic interests the authorised body develop approximated technical regulations. 3. The referred regulations and standards under the present Article apply to the technical production sector of goods and services, inter alia including trade and transportation. Draft 6
Article 10. Unified National System of Public Support 1. Beneficiary of social, health and education expenditures from the State Budget are the citizens rather than institutions. This support is rendered through allocation of financial resources or materialised and/or immaterialised forms of conditional financial instruments; 2. Social assistance is target-oriented and based on the assessment of opportunity; 3. Right of choice is guaranteed in view of the service provider financed with allocations from the State Budget; 4. It is not permitted to set such conditions for financial instruments that in any form grant privileges to any service provider or groups of such by discriminating them over other suppliers; 5. Financial resources earmarked for direct or conditional funding of citizens from the State Budget are formed into a unified system of public support. Article 11. Deviation from Macroeconomic Parameters in Exceptional Cases 1. Deviation from thresholds envisaged in Article 3.1 is possible during wars and/or if state of emergency has been announced on the entire territory of Georgia. 2. In cases envisaged in Clause 1 of the present Article the budget parameters shall return to the thresholds indicated in Article 3 of the present Law in the following year from the completion of the war and/or nationwide state of emergency if no economic recession is developed. 3. Except for the cases mentioned in Clause 1 of the present Article deviation from thresholds envisaged in Article 3.1.A and/or 3.1.B is permitted only in the conditions of economic recession. 4. For the purposes of the present Law the economic recession is deemed to exist when negative growth of GDP is witnessed in successive three quarters of any year. 5. No later than in three years from breaching the thresholds envisaged in Article 3.1.A and/or 3.1.B the consolidated budget parameters shall return to the referred thresholds if the breach has been caused by economic recession. 6. Average indicators of budget parameters in the year when thresholds envisaged in Article 3.1.A and/or 3.1.B were breached and immediately following four years shall meet the limits set under the present Law if the breach was caused by the economic recession. 7. In the conditions of an economic recession if the thresholds envisaged in Article 3.1.A and/or 3.1.B were breached the Government of Georgia is obloiged to develop a plan by years of budget parameters for returning to thresholds indicated in Article 3.1.A and/or 3.1.B in the Law of Georgia On Budget for the same year in line with Clauses 5 and 6 of the present Article. Article 12. Transition Provisions 1. Within 3 months from the enforcement date of the present Law the Government of Georgia shall develop a package of amendments to the relevant legislative instruments and submit it to the Parliament of Georgia. 2. Within 5 months from the enforcement date of the present Law the Government of Georgia shall develop a methodology for primary and comprehensive expertise analysis of draft legislation in view of identifying sources of funding for new expenditure obligations, increase or regulation burden and/or restriction of competition. Draft 7
3. For further improvement of the legislation regulating entrepreneurship the Government of Georgia shall be instructed to develop rules and conditions for revising by-laws by July 1, 2011, ensure the actual revision of the secondary legislation and invalidation of the regulation standards that are not cost-efficient, lead to unjustified expenditures and jeopardise the development of liberal entrepreneurship along with creation of new jobs. 4. To create a unified national system of public support the Government of Georgia shall submit the package of relevant legislative amendments to the Parliament by January 1, 2011. 5. The Government of Georgia shall ensure by January 1, 2011 the harmonization of legislation with Article 10 of the present Law in view of target-orienting social, health and education expenditures on citizens rather than institutions. 6. The Parliament and Government of Georgia shall ensure by January 1, 2012 the compliance with requirements of Article 7.4 of the present Law. 6. Considering Articles 7 and 8 of the present Law all the relevant amendments shall be made to the regulation of the Parliament of Georgia and enforced within 4 months. Article 13. Conclusion Provisions 1. The present Law, except for Article 3 shall be enforced from the moment of its publication. 2. Article 3 of the present Law, except for Clause 6 on planning budgets for the autonomous republics and local authorities shall be enforced from January 1, 2012. 3. Article 3.6 of the present Law in view of planning budgets for the autonomous republics and local authorities shall be enforced from January 1, 2014.
of the President of Georgia