Tax secrecy and corruption
16 January, 2014
Tax secrecy and corruption
The bill on easier access to tax secrecy creates corruption risks for government and undermines fair market competition. It aims to make tax secrecy law more liberal, ostensibly. It empowers the tax administration - the Revenue Service of the Ministry of Finances (MOF) - to dispense tax secrets or commercial secrets to the Georgian government as well as the Ombudsman, law-enforcement bodies or any other necessary body without the consent of the court or the taxpayer, if the need for
this information satisfies legal mandates … but it has no right.
The bill was initiated by the Ministry of Internally Displaced Persons from the Occupied Territories, Accommodation and Refugees of Georgia (MIDPOTAR). Already submitted to the legislative body, it will be considered during the spring session.
Analysts and researchers call the change unprecedentedly shameful; investors will be scared off. Even Prime Minister Irakli Gharibashvili, who said he actually learned of it through media, cannot get a grip on the projected change.
The current law mandates only that the tax administration has direct access to tax secrets. However, it may make disclosures to MoF employees, the Dispute Council (which operates with the MoF),
law enforcement bodies, the court, statistical bodies, and the National Bureau of Execution and Control Chamber of Georgia - if they need the information to execute their duty. In any other cases tax secrets can be disclosed only with the consent of the taxpayer.
The Prime Minister believes that MoF can easily provide the due information to the structure that needs it. “Why should you dispense the information to a structure that does not need it?” He wondered at the governmental session on 10 January, and asked government for more coherent action when initiating a bill.
The Personal Data Protection Inspector also seems puzzled. She calls for Parliament to hone the projected mechanism of tax secrecy dispersion very carefully in order to guarantee protection of personal privacy. She recommends registering every information dispersal case, and informing taxpayers every time their information is disclosed.
Minister of Finances Nodar Khaduri nevertheless finds the scheduled change harmless and logical. He believes it streamlines the law as it puts all governmental structures in an equal position to get access to tax information.
But some economic analysts are indignant. “The bill is a mug’s game,” Ditrikh Muller, a co-founder of Georgian Investment Group+, said angrily. He believes that the broader the circle of governmental structures admitted to tax secrets, the higher the risks of corruption and leakage.
“Now if my commercial secret leaks out I know how to trace down the culprit: it can be either the tax organ or the regulatory body of my sector [which may also have access]. But if the circle is widened, and what is worse, access to my secret gets easier, bypassing the court and my consent, how am I ever supposed to find the misdeed?” Muller asked.
He believes this kind of change may muddle the market completely: businessmen will by all means try to bribe officials to disclose commercial secrets of their competitors. It will spoil fair market competition and will lead companies to dig up dirt on each other. And of course this kind of practice will scare reputable investors off. “This is a shame, no civilized country knows anything like that, tax and commercial secrecy is sacred and should be protected if we want any economic development,” Muller said indignantly.
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