Civil Society Discussed the New Tax Code

28 Jun, 2010

Tbilisi Marriott Hotel has hosted discussions over the new Tax Code.  The meeting, which was initiated and organized by the Open Society Georgia Foundation, brought together government officials, business companies, members of the Federation of Professional Accountants and Auditors, representatives of the US Chamber of Commerce, the Georgian Chamber of Commerce and Industry, the National Bank of Georgia, authors of the old tax code, political parties, journalists, field experts and non-governmental organizations.

The ultimate goal of the meeting is to reflect public interests in the final version of the Tax Code, which according to the Ministry of Finance “will change by 98%”.  The amendments call for the unification of the Tax and Customs Codes and will have a significant impact on small enterprises, considering endorsement of the new taxation regime.

“We are helping businessmen, NGOs, the media and experts to play active role in the consideration of the draft of the document and adopt the code that will contribute to the improvement of a business environment.  NGOs and field experts have come up with recommendations regarding weaknesses of the code.  The issues that arose at the meeting will be added to recommendations; they will be processed and final versions will be submitted to the government”, Irina Lashkhi, OSGF representative, said.

At the meeting, Deputy Finance Minister Irakli Siradze talked about key amendments made to the code;  Irakli Shavishvili, a representative of  I&N Audit reviewed code details and offered his own views.  He noted that he could not observe any “revolutionary” changes in the code.  In his opinion a new tax code would worsen rather than improve a business environment.  He pointed to serious weaknesses in the terminology, concepts and definitions.  Terms denoting a period, like a calendar year, tax year etc. are completely confused.  Many definitions are ambiguous and confusing for a taxpayer.  To prove his argument he named the example of the property tax mentioned in the code as “the property tax on property and property tax on land.  The term used in two different contexts should logically have a different meaning.  At the same time, according to the definition of terms provided in the preface the “property” is the taxable property and taxable land, which means that land is double-taxed, once as a piece of property and second as a land plot”.  Further Mr. Shavishvili said the government had excess power in the new Tax Code.  “In case of ambiguity a body at the Ministry of Finance, the Council of Auditors or the Council of Disputes is entitled to make a decision.  In particular, the code says that if the Council considers any paragraph of the code to be ambiguous, it will be interpreted in favor of a taxpayer.  Any bias shall be ruled out in resolving such issues.  This shall be definitely decided”, he said.

Mr. Irakli Siradze, a Finance Ministry official, who listened to a number of critical remarks during the discussion, said that the government was ready to take into account issues raised by the business and civil sector.

“Today’s meeting is one more meeting in a series of discussions over the draft code.  We called this version draft right at the beginning.  Nobody had illusions that there would not be any remarks.  If those remarks are submitted constructively, are supported by respective arguments and are not delivered in the form of mere statements, we are ready to consider and regard them.  For this very reason there is a working group in the Ministry of Finance, which will consider notes regarding the code.  Naturally we have our own arguments, but I would like to reiterate that we are ready for cooperation”, he said.

Discussion focused on imposing VAT on income from commercials and distribution for the press when considering key amendments to taxation.  Representatives of the press and experts are concerned that the new tax will make the printed media bankrupt and lead to the shut down of most of the magazines and newspapers.

“Under the current code the press does not pay taxes for the imports, delivery, sale and distribution of goods, printing services and commercials.  Because of new taxes levied on the press, regions will stay without newspapers, while the media in Tbilisi will find themselves in a tough position”, Lasha Tughushi, the editor of the Georgian daily Rezonansi, said.

Asked by journalists about political reasons behind making tax changes regarding the press, Irakli Siradze said that he could not remember a paragraph on canceling privileges for the press in the 308-article code.

“This may be a mechanical or some other kind of error.  I will make additional inquiries on this issue”, the Deputy Minister said.