Guram Uplisashvili
Doctor of Economics, Associate Professor, Central University of Europe
guram.uphlisashvili@unik.edu.ge
Abstract
Among the significant reforms implemented in Georgia’s tax system over the last two to three decades, profit tax reform holds a particularly special place. We have in mind the adoption of the so-called Estonian model of profit taxation. This model is also called distributed profit tax, since according to it; the main object of taxation is the distribution of dividends. However, in addition to distributed profit, according to the model implemented in Georgia, certain categories of expenses/costs are also subject to taxation, which could have been used as hidden alternatives to profit distribution, including: expenses that are not related to economic activity; undocumented expenses; free supply of goods/provision of services and/or transfer of funds; excessive representative expenses and so on.
The profit tax model introduced in Georgia also differs from its Estonian analogue in terms of the coverage of taxation subjects and the extent of sectoral exceptions. While in Estonia this model operates mainly universally across all sectors, sectoral exceptions in Georgia are much broader. The new regime was extended to non-commercial and insurance organizations only at a later stage, while banking institutions, credit unions, microfinance organizations, and lending entities remained under the classical taxation regime and their taxation rate even increased. Persons engaged in various types of gambling business are also taxed under different rules.
The paper examines the outcomes of the profit tax reform in Georgia. Although there was some acceleration of economic growth in the years following the reform, we believe its contribution is relatively limited when considered against the backdrop of the economic consequences of various most important economic, political and social events of the same period. The fiscal impact of implementing the new profit tax regime is discussed in detail – according to taxes mobilized in the budget, as well as the number of declarants, declared profits and dividend values. The influence of profit tax reform on taxpayer behavior and the working practices of tax administration bodies is also discussed.
Keywords: Taxes, Profit Tax, Estonian Model, Profit Distribution, Dividends
JEL: H25; H32; H71
DOI: 10.52244/c2025.35
The article is in Georgian.
References
Annual Reports of the Revenue Service of the Ministry of Finance of Georgia. URL: https://rs.ge/AboutUs?cat=5&tab=1 (accessed 19.09.2025);
Ministry of Finance of Georgia, State Finance Statistics, Consolidated Budget, URL: https://www.mof.ge/ka/fl/sakhelmtsifo_finansebis_statistika__naerti_biujeti?page=1 (accessed 19.09.2025);
National Statistics Office of Georgia (Geostat), URL: https://www.geostat.ge/en (accessed 19.09.2025).
Tax Code of Georgia (codified), 2025. URL: https://matsne.gov.ge/document/view/1043717?publication=232 (accessed 19.09.2025);