Georgia - Politics, government, and taxation

Georgia's political system is modeled on that of the United States with a directly elected president, parliament, and judiciary. Politics in the Caucasian republic has been dominated by Eduard Shevardnadze since 1972, the year he became First Secretary of the Georgian Communist Party. Before becoming Soviet Foreign Minister under Mikhail Gorbachev in 1985, Shevardnadze gained a reputation for his anti-corruption policies and his economic initiatives. Shevardnadze entered into alliances with paramilitary forces when he felt it necessary and arrested them when he felt that he was strong enough to maintain power. He adopted an anti-Russian policy at the beginning of his administration, then sought and received Russian aid in putting down an internal rebellion. He even joined the Commonwealth of Independent States (CIS)—a heretical act for Georgian nationalists considering the dominant role Russia plays in that organization. When it became clear that Russian economic aid would not be forthcoming, he explained that he attained concessions for his country by such devotion. As Russia adopts a hostile position towards the small republic, some suspect that the Georgian president is now saying what the West wants to hear in order to get the loans and legitimacy necessary to retain control. Shevardnadze was elected for another—and, according to himself, final— 5-year term of office in April 2000.

To consolidate his influence and further his policies, Shevardnadze founded the Citizens Union of Georgia (CUG) party in 1993. Officially dedicated to free market economics, the CUG advocates increasing the collection of taxes, fiscal rectitude, and improving social welfare provisions. The CUG emerged as the largest party after parliamentary elections in 1995 and 1999. As with society generally, politics is clannish in Georgia and many important administrative functions are handed out to family relatives and friends. Despite the more than 100 small parties in Georgia, there is little effective opposition to the Shevardnadze-led government. With the exception of the electorally insignificant communist faction, all political groups are committed to the free market, so alternative leaders provide a functional but not an ideological opposition to the status quo.

The "black hole" of tax collection is so great that tax revenues constituted only 10 percent of gross domestic product (GDP) in 1997, a year in which the Georgian economy enjoyed one of the world's fastest growth rates. Insubstantial tax revenues are partially due to the narrow tax base; most of those who do pay taxes are state employees for whom tax is automatically subtracted from salaries. While those living below the poverty line might have some ethical grounds for evading tax, many of those that have the means to pay have shown no willingness to contribute their share. The situation is aggravated by the actions of underpaid tax officials who ignore hidden income in return for pocketing a portion of the total amount due. The government has done little to develop more effective means of enforcing the law and appears resigned to the situation.

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