Tax Preferences for TV Channels Are Illegal
18 October, 2012
Tax Preferences for TV Channels Are Illegal

 

A tax preference given to Georgian TV channels are illegal and undermines the  competitive climate in the country. 

Former government decided to make its last “gift” to Georgian TV market:  on October 15, 2012, Aleko Khetaguri, ex-finance minister of Georgia, announced his decision to cut down the past-due tax liabilities as well as volume of sanctions fixed on past-due arrears to TV companies across the country.

 

He did not elaborate details of the preference; neither did the Ministry of Finance (MOF) disclose

more details later with Georgian Journal or any other media. MOF stressed that all details are included in the official statement of Khetaguri. Khetaguri believes the decision will put Georgian TV channels in equal competitive condition and will encourage market development.

“It alleviates financial obligations of  both central and regional TV companies and puts them in equal taxation conditions that will ensure stable financial conditions of broadcasting companies, encourage TV market development and boost the competition. Broadcastings will be able to attract new investments,” Khetaguri stated and reminded the public that similar tax preference took place in 2010 and both central and regional broadcasting enjoyed this privilege.

The suggested tax preference bewildered law-obedient tax-payers including so-called opposition TV channels as of Maestro and Kavkasia. They find the initiative illegal and believe the ex-government tries to amnesty Rustavi 2 and Imedi channels largely known as pro-ex-governmental companies. Former members of government connected with the ex-government and President of Georgia, Mikheil Saakashvili, hold shares at Rustavi 2 and Imedi officially. Kavkasia and Maestro believe Saakashvili himself is the de-facto owner of the questioned TV channels that are the most non-obedient tax-payers as the research of Transparency International Georgia (TI Georgia) suggested in this past summer.

Based on the web-site of Revenue Service of MOF, Imedi owes GEL 13.9 million in taxes, Rustavi 2 - GEL 5.5 million and the budgetary-based Georgian Public Broadcast (GPB) - GEL 3.5 million. According to the TI Georgia research the said liabilities accrued since a tax amnesty of 2010 that erased GEL 36 million of liabilities from the books of Rustavi 2 and Imedi as major beneficiaries were the national TV channels. Trialeti TV and a few other media outlets had accumulated some minor tax obligations of less than GEL 10 thousand. A small part of the amnesty also benefitted TV stations critical of the government: Channel 25 was relieved of some GEL 277. 500, and Trialeti TV was forgiven some GEL 45 thousand. Kavkasia and Maestro meantime owe no taxes and enjoyed no amnesty, only pressure their owners assure.

“Nobody has never ever forgiven us any tax liability, we pay all taxes diligently and once had to pay even penalties when we passed the payment time,” Nino Jangirashvili, Director of Kavkasia, told Georgian Journal. She believes this alleged tax preference is a crime and infringement of free competition rather than encouraging fair market game as Khetaguri stated. Jangirashvili thinks the real target of the tax-preference initiative is an attempt of Saakashvili to amnesty Rustavi 2 and Imedi with total tax arrears of around GEL 19 million.

According to her, people sit in the prison for years due to GEL 5 worth past-due [tax] liabilities and mistakes in the GEL100 worth bill-of-lading while Rustavi 2 and Imedi have been exempted from millions of tax duties for years.

“I think it is a crime, it is an obvious deal. When you steal millions from the state budget is not it a crime?” Jangirahsvili said to Palitra TV. “Starting 2004 Rustavi 2 is actually exempted from taxes and accrues millions while nobody else is exempted, is not it a crime?”

Mamuka Glonti, a founder of Maestro TV, assesses the recent tax-preference as a robbery of taxpayers. He believes Saakashvili stands behinds the preference initiative.

“Saakashvili very likely owes money to Rustavi 2 and Imedi and cannot pay,” Glonti presumes.  Both Jangirashvili and Glonti demand cancelation of the said tax-preference decision and muse over an idea whether to file a lawsuit separately or call for other media too.

Ditrikh Muller, a co-founder and legal expert of Georgian Investment Group, also believes the last decision of Khetaguri is a crime and infringement of other taxpayers’ rights.

“It is an illegal act to give preferences to certain commercial entities at the market no matter whether or not it is media or any other business. All commercial organizations should be put in equal conditions. If they have losses and tax arrears it bespeaks of problems in their management and it is none of the state problem, let them improve management and pay taxes like all of us do,” Muller told GJ. “As to GPB, its arrears can be erased since the company is budgetary-based, but the issue of responsibility of GPB’s management should be raised since they cannot handle with the company properly.”

He believes Khetaguri’s decision is triple-illegal as it violates not only competition but the tax and budgetary laws.

“The tax legislation does not envisage reducing of tax-duties that is an outlaw. The Revenue Service (RS) had to arrest accounts of non-obedient tax-payers owing millions for years instead of giving preferences. RS violated the law too. Neither did the state budget foresee loss of tens of millions in taxes.  Besides, Khetaguri who actually stepped down from the post of minister as far as the ex-government is officially retired until approval of the new one, had no legal right to issue any official decision,” Muller said.

Rustavi 2 and Imedi make no comments.

 

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