NGOs demand tax amnesty to be transparent

13 May, 2010

During his annual speech to the Parliament on February 26, 2010, speaking about the media freedom President Saakashvili stressed that media freedom and pluralism is the foundation for democratic progress and it is very important that all TV channels, regardless of their size and position, broadcast without any obstacles. According to president Saakashvili, due to small size of the Georgian advertising market and limited financial resources almost all private TV channels exist in a difficult financial context and heavy tax debts and this is especially true for small regional TV channels. Further on, he brought an example of Regional Adjara TV station “25 Channel” which was nearly closed due to tax burden. President underscored that for the sake of the development of Georgian democracy, it is unacceptable for TV channels to be closed because they do not have enough money. Thus, based on example of tax relief and restructuring for “25 Channel” he proposed a new initiative envisaging tax amnesty to TV stations.

The given proposal led to confusion and different interpretations. According to some sources, president offered tax amnesty only for regional TV stations; however, others argue that president meant all Georgian TV channels, whether regional or national.

President initiative was followed by legislative initiative of the government that envisages tax amnesty for all those TV stations throughout the country, which currently owe unpaid taxes. The government says that total sum of unpaid taxes, plus fines imposed for a failure to pay taxes by the stations amounts to “about GEL 36 million”.

At the same time, Christian-Democratic Movement has submitted to the parliament another legislative initiative on the same matter, but it envisages tax amnesty only for the regional television stations, not covering the Tbilisi-based broadcasters.

Those two initiatives caused confusion in public and raised question: only regional TVs should be given tax amnesty or all broadcasters including Tbilisi based ones.

On May 7, Friday, 14:00pm the Open Society Georgia Foundation together with group of civil society organizations called for a round-table discussion with the participation of government authorities, decision-makers, broadcasters, NGOs and other interested parties to shed light on situation regarding tax amnesty for TV channels and make the decision-making process more transparent and inclusive.

The representatives of “Georgian Young Lawyers’ Association”, “International Transparency – Georgia” and magazine “Liberal” focused on amount of debts and legislative part of the initiative in their presentations.

Shorena Shaverdashvili, Editor in Chief of “Liberal” magazine, reviewed the debts owed by the broadcasting companies and named concrete numbers. The research conducted by the “Liberal” revealed that the total amount of the owed debt is GEL 11 million, but that does not cover some broadcasters. As Shorena Shaverdashvili noted, “11 million from 36 million are confirmed as a debt but it is unknown where does the rest amount come from”.

The representatives of Georgian Young Lawyers’ Association spoke about the legislative sides of the tax amnesty and the differences between the debt restructuring and writing off (for more details please see attached the presentation from “GYLA”). Tamar Gurchiani named the concrete examples of debt restructuring and noted that even in this case restructuring is the optimal solution.  “There is an experience of restructuring the debts owed by the TV channels but no practice of writing them off” – mentioned Tamar Gurchiani. The Georgian Young Lawyers’ Association requested the cases to be studied individually in order to take proportional measures in the future.

Different opinions were expressed during the heated discussion. One part of the participants considered that writing off the debt results in the creation of unequal competitive environment and somehow encourages the broadcasters to refrain from paying the taxes hoping that the amnesty will take place again in the future. Besides, this situation brings material loss to the honest tax payer.

“Writing off the debts is the process when the amnesty applies to media that owes debts but at the same time there are some broadcasters having no debt at all. They honestly paid all the taxes and now will find themselves in the situation where they are financially damaged. Certain problems might also refer to the independence of media. Do you think that the media will still remain independent after its debts are written off?” – noted Lasha Tughushi, Editor in Chief of the newspaper “Rezonansi” during his speech.

As MP Pavle Kublashvili mentioned, “individual review implies subjective review and thus it is impossible to come up with the objective decision. The main idea of writing off the debts is to support the development of the broadcasters despite the amount owed by this or that TV Channel. If the amnesty is in place it will automatically apply to all the broadcasters, no matter whether they are eager to use it or not. The amnesty does not often observe the principles of the equity and this refers not only to the tax amnesty. There is some part of the unfairness in the amnesty itself, since the individuals it applies to turn out to be in unequal conditions. The tax amnesty should be treated carefully, since it harms the culture of the tax payer and the honest tax payers are losing in this case. Therefore there is a risk that the honest payers might also refrain from paying and such cases might become systematical. However this amnesty is a single act and it will never happen again in the future”.

The representatives of the regional broadcasters noted that the amnesty will solve the majority of the problems they are currently facing. As Natia Kuprashvili, representative of Regional Broadcasters Association said, “There is almost no advertising market in the regions. Currently the income of the regional broadcasters equals to zero and they will be definitely closed if the amnesty is not introduced”.

It was also mentioned that if the amnesty will be approved it should apply to the print media as well. “If we speak about supporting the media, why do we refer only to the televisions and not print media or radio? TV channels are the key players on the market and the main share of the advertising market belongs to them. The print media is in a comparatively bad financial situation but the role it plays in developing the quality of the country’s democracy is the same” – stated Shorena Shaverdashvili.

For more information please see attached the presentations from Young Lawyers Association and the “Liberal” magazine.