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Early this week, on May 5, 2017, public hearings began across Georgia on constitutional amendments proposed by the ruling coalition. Ever since receiving a constitutional majority in parliament last year, Georgian Dream has prepared to change the country’s constitution. Georgian Dream’s first step was to set up a Constitutional Reform Commission to develop draft constitutional amendments, which would later be subject to public debate and two parliamentary votes. The commission has been plagued by severe differences between Georgian Dream and opposition groups from the very start — many have left and boycotted the commission. In response, the opposition has voiced concerns over the commission’s plans to make the current mix of proportional and majoritarian systems into a strictly proportional one, keep the 5 percent parliamentary entry threshold for political parties, and abolish direct elections of the president, stating the ruling party will use these new changes to stay in power permanently. However, opposition groups are yet to comment on Paragraph 94 of Georgia’s constitution. This particular paragraph forbids the raising of taxes by parliament without holding a special referendum, which can only be initiated by the government. This paragraph is part of Georgia’s Liberty Act, which former president Mikheil Saakashvili pushed through in 2010 in order to severely weaken future governments by limiting their sources of budget revenue and strangle the prospect of progressive taxation in the name of “freedom” for enterprise and market. In doing so, it entrenches libertarian ideology in the country’s constitution, to the detriment of desperate, working Georgians.

Extra Regressive After Saakashvili’s Rose Revolution began in 2003, Georgia’s tax system was reformed to be one of the simplest — and most regressive — tax systems in the world. There are only six types of taxes: a 20 percent flat income tax, a profit tax (which has now been abolished if the company reinvests, then they pay no taxes), an excise tax on a few selected goods, VAT at 18 percent, an import tax that ranges from 0 percent to 12 percent, and a property tax which is up to 1 percent. There is no progressive taxation, no inheritance tax, and there are no social security taxes. In 2010, Georgia’s president, Mikheil Saakashvili, rushed through amendments to the constitution restricting the powers of the president and rebalancing power in favor of the cabinet of ministers. At the same time, Saakashvili included a paragraph and an accompanying organic law that would restrict tax-raising powers, the so-called Liberty Act, without much in the way of public or private consultation. Even the IMF was against it, and international advisers forced a provision in the bill allowing the government to temporarily increase taxes for up to three years in emergencies. As Saakashvili and Kakha Bendukidze, the mastermind of Georgia’s free-market reforms, co-wrote in their article, “Georgia: The Most Radical Catch-Up Reforms“: “The idea was to design a straitjacket for the irreversibility of reforms carried out by the government during the previous period and to create the basis for the inviolability of the principles of economic freedom.” Paragraph 94 thus caps government-expenditures-to-GDP ratio at 30 percent, the debt-to-GDP ratio at 60 percent, and the budget-deficit-to-GDP ratio at 3 percent. A referendum on this issue can only pose the question of raising flat taxes for all Georgian citizens — the organic law forbids a referendum on progressive taxation.

Elite Consensus Last month, as part of the constitutional reform process started by Georgian Dream, the Social-Democrat parliamentary faction initiated a proposal to remove Paragraph 94. They did so with virtually no support from other parliamentary groups. Instead, they co-signed a letter demanding its removal with twenty-four other public organizations, including the sizeable Georgian Trade Union Confederation. In turn, the Constitutional Reform Commission, which has focused on deliberating procedures of political party participation, safeguarding the Georgian language, and defining marriage as being between a man and a woman, overwhelmingly voted against removing the Liberty Act during the final vote on the draft amendments. Over the past year, Georgia’s conservative groups have demanded a strict definition of marriage, with stalls in the streets and massive canvassing to promote a traditional and heterosexual definition of marriage. Not surprisingly, western media has largely concentrated on the “marriage question,” completely ignoring other detrimental aspects of the constitution amendments. Indeed, the commission’s decision signals the high level of commitment to free-market ideology that is being reified in Georgia’s constitution. And since the commission has voted, they will now hold brief discussions over the new draft for the benefit of the public before parliament votes in the spring and again in the fall sessions.