Tax legislation remains imperfect
07 October, 2010
Tax legislation remains imperfect

The new tax code that was excepted to be revolutionary, repeats old blemishes: the key demand of business to implement the presumption of innocence of tax payers is still ignored, double interpretation and subjectivism still remain.
The new tax code that had been discussed during last summer was approved by 73 votes. Oppositionist MPs did not support the law.  The new tax legislation was supposed to be radically different from the old and notorious tax code. But instead of revolutionary

approach trumpeted by the government all summer long, the code proposes tepid changes. The key demand of business to incorporate the idea of presumption of innocence of tax payers in the legislation [in case of ambiguous disputes], remains unheeded. Meantime the most striking defects of the old code -subjectivism and double interpretation - remain and without presumption of innocence of tax payers, create ground for violation of rights of tax payers.


According to Kakha Baindurashvili, Minister of Finances of Georgia, the new tax code is drafted on the basis of the international experience and comprises many novelties that will create the beneficial environment for conduct of business and the entrepreneurship. The novelties are the institute of the Taxation Ombudsman, legalization of the business and classification, the new regimes of the taxation and lessening the taxation burden.   All possible business including small, medium and big businesses are supposed to enjoy preferences, Baindurashvili said during the plenary session at parliament. 
Economic analysts say the new code is better than the old one but not as much as expected. The key promise of government to reduce the benchmark of Value Add Tax (VAT) payers was not kept.  The first version of the draft tax code having introduced definitions of micro and small businesses proposed to define the business with annual turnover less than GEL200 thousand  as small and exempt it from VAT. According to the old tax legislation, business with the annual turnover of GEL 100 thousand had to pay VAT. However government changed its mind in the end and decided not to increase the benchmark for VAT payers from GEL 100 thousand to GEL 200 thousand. The governmental explanation is that it included risks, namely that big business tempted to elude VAT might separate its business into smaller fractions.


According to Zurab Melikishvili, the Chairman of the Committee on Finance and Budget, the decrease of small business margin was agreed with the business, as far as in the opposite situation the country would have missed on the significant revenue and that would have fostered economic downfall.
Davit Narmania, an economic analyst with the non-governmental Centre for Economic Problems Research (CEPR), believes government cared to insure bigger budgetary incomes by detaining the old small business benchmark in fact as in case of increasing the VAT payers’ benchmark to GEL 200 thousand the taxation area might shrink affecting the state budget. 
Levan Kalandadze, Executive Director of Association of Georgian Small and Medium Enterprises, worries that definition of micro business includes hidden bombs.  According to the new tax code, if annual turnover of a physical entity does not exceed GEL 30 thousand it is a micro business and is exempted from taxes. Kalandadze stresses that the law does not cover legal entities including Ltds [that make the bigger part of small business in the country] even if their annual turnover is under GEL 30 thousand, that discourages small business development actually.
“It comes out that a small bakery Ltd with GEL 30 thousand of turnover and a big business like a metallurgic factory will be taxed equally,” he explains.


Moreover, economic analysts disapprove the extension of the tax base. Government imposes excises on communication sector and the excise rate doubles on spirit. Moreover, the income tax rate increases from 18% to 20% and the profit of dividends that was supposed to be exempted from tax starting 2012, will be taxed by 5% till 2014.
There are many question marks that are supposed to be streamlined via secondary legislation over which government promises to work with business by the end of this year prior the new code enters into effect on January 1st, 2011.  
“This is no revolutionary tax code, it is not even an evolution paper, it proposes just slight changes that did not demand creation of a new code, and we could just amend the old one. And if works on secondary legislation are supposed to go on by the end of this year why the tax code was approved in a slap-dash manner? Where do we hurry? It also might be approved later so as to make all question marks clear,” Kalandadze told Georgian Journal.
Narmania assesses the governmental approach as positive nevertheless for first time Georgian government co-operated with the business sector including both small and big ones as well as with independent experts and took their opinion and consultations into account. He hopes that works over the secondary legislation will be continued in similar way and the tax legislation will be better after all.

Print
Other Stories
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
A factory of electric vehicles to be built in Kutaisi
Prime Minister Mamuka Bakhtadze stated that a factory of electric vehicles will be built in Kutaisi at the presentation of the Aigroup business group.
Qvevri-shaped hotel complex to be built in Telavi
A Qvevri-shaped hotel complex is scheduled to be built in the village of Shalauri in Telavi, Kakheti (east part of Georgia).
Georgian designers presented at Fashion World Tokyo 2019
The products of 11 Georgian designers are showcased at Fashion World Tokyo 2019,
Silknet raises $200 million in Eurobond issue
27 March 2019 - JSC Silknet (“Silknet”), one of Georgia’s leading telecommunications operators, has successfully priced a debut $200 million 5-year 11% senior unsecured bonds issue (the “Notes”).
Pistachio trees will be planted in Georgia
Dozens of hectares of Pistachio are planned to be planted in Georgia this year.
Toyota Safety Sense and Hybrid Technology
Toyota Caucasus, has presented two new models the 5th generation RAV4 and the 12th generation Corolla at Rustavi International Motorpark, several days ago.
Bidzina Ivanishvili “became number one oppressor of businesses in Georgia” - ICC Georgia chairman Fady Asly
Mr. Ivanishvili promised the business community to protect them from harassment and pressure, unfortunately his words died with the sunset of that day
The best brands of Belarus will be exhibited on a large-scale exposition in Tbilisi
"The Belarusians like to come to Georgia to relax near the sea in Batumi as well as to stay in sunny Kakhetia."
Don’t treat business like a hooker! - Georgian businessman Vasil Soprpmadze addresses politicians
Businessman Vasil Sopromadze, founder of the company "Fresco", addresses politicians
RAV4 No Compromise and Corolla Set to Impress – Two New Cars Presented by Toyota
Toyota Caucasus, the company constantly aspiring to greatness, has presented two new models the 5th generation RAV4 and the 12th generation Corolla.
Mamuka Khazaradze quits TBC bank, does not sell the TBC Bank share
I made a decision to leave TBC bank where I spent 27 years of my life
10 Reasons to buy an apartment in the suburbs
There is a tendency for Tbilisi dwellers to move from central parts of the capital to the suburbs.
Georgian citizens are granted the right to work in France
The French Embassy in Georgia made remarks on granting Georgian citizens the right to work in France
PHOTO OF THE DAY
GEL Exchange Rate
Convertor
15.07.2019
16.07.2019
USD
1
USD
2.8513
2.8555
EUR
1
EUR
3.2094
3.2210
GBP
1
GBP
3.5727
3.5862
RUB
100
RUB
4.5215
4.5596
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.8555
EUR
1
EUR
3.2210
GBP
1
GBP
3.5862
RUB
100
RUB
4.5596
July 2019
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31