Banks Support Taxation Initiatives
24 October, 2013
Banks Support Taxation Initiatives
Introduction of the united treasury code for registering tax incomes as well as return of untaxed subsistence minimum of the income tax are on the top of agenda at the moment and Ministry of Finances calls banks to support the administration to bring the said initiatives into reality.
Nodar Khaduri, Minister of Finances of Georgia, met with representatives of the Georgian banking sector on 20 October 2013 to secure their support. According to him, the united treasury code will make
payment to the state budget simpler to business since it will be no longer required to pay taxes in different accounts but the entire sum will have to be paid to the state coffer in one payment.
“This mechanism reduces risks of blunders on the part of either the head of an enterprise or its book-keeper,” Khaduri stated. More than that, information on this one-stop transaction will be much more accessible than the one on multiple accounts.
As to the untaxed minimum of income tax, it also requires banking system. This preference exempts the subsistence minimum equivalent sum of GEL 150 in the income tax to employees with monthly salaries less than GEL 500 that makes the overwhelming majority in Georgia. This exemption came into effect starting January; its mechanism is pretty intricate: it exempts 20% or GEL 30 out of GEL 150 that is accumulated in the state budget along with the non-exempted part of the salary within a year and add up to GEL 360 in 12 months. This GEL 360 will be paid back to the targeted group as the so-called 13th salary by the end of the same year. To request the saved money back, one should have a banking account, and secondly, the person in question should submit a declaration with the request [of the money return] at MoF, which acknowledges the fact that about 20% of such employees may miss this chance due to bureaucratic procedures related to declarations.
“Both are large-scale initiatives and the banking sector will naturally participate in this kind of state projects, as far as they cannot come true without the banks’ support,” Zurab Gvasalia, President of the Association of Banks of Georgia, said.
However, some economic analysts think the offered untaxed subsistence minimum mechanism looks quite cumbersome to administer and may instead bring inconvenience and non-transparence to beneficiaries. First of all, it needs additional administration resources and money to hire people at Revenue Service to calculate this new kind of exemption taxation, which amounts to excessive expenses. Besides, the monitoring process of how money is deduced from accounts seems quite difficult. Moreover, most of the people who receive less than GEL 500 as salaries while working on micro-businesses have no banking accounts. Most probably, they will have to open bank accounts willy-nilly if they would like to enjoy the taxation preference.
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