Abstract
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Georgia's economy has always been vulnerable and unstable to crises and external shocks over the past three decades, further exacerbated by the Covid-19 pandemic, which has put on the agenda the feasibility of revising the mechanism for distributing the current tax burden and income between taxpayers. The crisis has clearly revealed the advantage of elastic taxes with respect to the taxation base and the need to use a progressive taxation method for certain taxes. Due to the absence of a tax-free minimum and a method of progressive income taxation the situation of the low-income population in Georgia has deteriorated sharply in the context of the pandemic. In a country where the annual income of more than 96% of the employed population is under GEL 40,000 (USD 12,744), the tax burden under the standard VAT rate, which is not differentiated depending on the types of goods and services supplied, is heavy. The property tax of natural persons does not ensure the efficient use of property.
The purpose of this article is to assess the state of the Georgian economy before the pandemic and in the context of a pandemic and to substantiate the need for changes in tax legislation to improve the quality of life of employed people, reduce the tax burden for a significant segment of market entities that have not withstood the crisis caused by the Covid 19 pandemic. The Research methods of this article are: scientific abstraction, comparison of information, generalization, analysis and synthesis were also used. The empirical basis of the research is the official information of the National Statistics Office of Georgia, the normative acts of the Government of Georgia, the Georgian Tax Code and scientific publications. The theoretical and empirical methods used in the article confirm the inefficiency of the existing taxation method. Using the scientific abstraction of the research, as well as the method of analysis and synthesis, the official information of the National Statistics Office of Georgia has been processed, the correlation between economic events has been studied and the result has been generalized in the sense that the distribution of income under the conditions of application of the existing taxation method creates social inequality for employees while also impeding the development of the real sector of the economy.
The study concludes that in order to ensure fiscal sustainability and economic growth of the budget, it is important to revise income, property and value added taxes, which, in turn, will be a task of social importance in particular, in order to create equal development opportunities for market participants, it is important to review the value-added tax and set optimal differentiated rates; In order to improve the quality of life of working people and to overcome social inequality, it is advisable to replace the existing 20% proportional method of income tax with the progressive method of taxation. It is also necessary to adopt a tax-free minimum; In order to increase the efficiency of property tax, it is advisable to revise the rates of the tax on agricultural land and established benefits for individuals, as well as revise the property tax (excluding land) and make it progressive based on the market value of the property, which will also result in an increase in local budget revenues.
COVID-19 can help Georgia to learn lessons from the problems that emerged during the crisis, and implement legislation amendments and correctly plan reforms because the existing situation increases and deepens financial inequality.
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