Georgia plans hidden asset pardon

Georgia is offering a one-off 'tax amnesty' to people who hid their earnings under the regime of former president Eduard Shevardnadze.

The country's new president, Mikhail Saakashvili, has said that anyone now willing to disclose their wealth will only have to pay 1% in income tax. The measure is designed to legitimise previously hidden economic activity and boost Georgia's flagging economy. Georgia's black market is estimated to be twice the size of its legal economy.

Mr Saakashvili, elected president in January after Mr Shevardnadze was toppled, has urged the Georgian Parliament to approve the amnesty as soon as possible. It is one of a series of proposals designed to tackle corruption, which was rampant during the Shevardnadze era, and boost Georgia's fragile public finances.

The new government is encouraging companies to pay taxes by scrapping existing corruption investigations and destroying all tax records from before 1 January, three days before President Saakashvili was elected. "There are people who have money but are afraid to show it," the president told a government session. "Documentation about where this money came from doesn't exist because under the former, entirely warped regime, earning capital honestly was not possible."

By declaring their assets and paying the one-off tax, people would be able to "legalise their property", Mr Saakashvili stressed.

"No one will have the right to check this money's origin. This money must go back into the economy." The amnesty will not extend to people who made money through drugs trafficking or international money laundering. Criminal investigations in such cases -thought to involve about 5% of Georgian businesses -are to continue. Mr Saakashvili has accused the Shevardnadze regime, which was toppled by a popular uprising in November, of allowing bribery to flourish. Georgia's economy is in a desperate condition. Half the population are living below the poverty line with many surviving on income of less than $4, or three euros, a day. The unemployment rate is around 20% while the country has a $1.7bn public debt.