Private tax inspector scares business
09 June, 2011
Private tax inspector scares business

A self-financed private tax inspector will be checking cash machine-related procedures soon. A pilot project is supposed to start by end of this week and last for 2-3 weeks. The idea is that a private person instead of tax officer will control how honestly business uses cash-registers. The job will be paid based on number of discovered infringements. The initiation is risky and unreasonable, economic analysts think.

Chasing after business-oriented tax reforms Georgian government appears prolific with tax-related novelties lately. However

to make taxation more liberal Revenue Service decided to relay on private persons, assistance rather than improving the tax administration system within itself.

Now to insure cash-registers smooth operation it decided to involve society in control mechanism and fix one private tax inspector at businesses that use cash-machines. The person is responsible to monitor whether or not the business is registered, whether or not it uses cash-register in each case, prints bills and puts right figure in it… in a word if it observes all due procedures related with the cash-machines in compliance with the law. Tax inspectors will be selected through competition the key criteria of which is not to be a tax-law pundit but just psychologically acceptable.

“First of all we select future private inspectors based on their psychological portrait,” Jaba Ebanopidze, Head of the Revenue Service of the Ministry of Finances of Georgia, told Georgian Journal.  “We learn their psycho portraits to get aware whether or not they do fit to this job, we do not want them to be like robbers.”

Competition has already been announced for 20 vacancies for pilot program and 500 applicants have already appealed. All in all 200-300 people are supposed to get the job till the pilot program gets through. What scares business is that the private tax inspectors will be self-financed and thus prone to find breaches even if they were not committed. On the other hand, economic analysts think that they may enter in corrupted deals with entrepreneurs and hide tax infringements for certain payment.

Ebanoidze downplays both risks. First of all he advises not to commit breaches if they fear to be punished. On the other hand, to protect entrepreneurs from biased behavior entrepreneurs may appeal revenue service with claims if they disagree with the private inspectors’ decision.

According to Ebanoidze this private tax inspector remedy was invented to combat cheating practice that increased lately due to the liberalized approach of the revenue service.

“No sooner we made inventory procedures simpler and made our approach more liberal to entrepreneurs the rate of non-printing bills by cash-registers increased from 10-15% to 25-30% in a month that is dramatic. We had a testing inspection on several streets in Tbilisi the other day, and 50 out of inspected 400 businesses were not registered at all. On Saburtalo Street alone out of 150 units 20 were not registered and ran economic activity. To such tax elusion we created an adequate counter-remedy and came out with private tax inspector initiative,” Ebanoidze said.

He believes the private tax inspectors’ mechanism rules out corruption deal between inspectors and entrepreneurs. Income of private tax inspector will be based on certain percentage of the discovered violation. The percentage rate is not outlined as of yet but it will be not less than GEL 100 per breach. On the other hand, private inspectors will change almost per week Ebanoidze said that cuts corruption deal chances next to zero.

“If business enters in corruption deal it may pay more than through penalties in fact. We plan to pay at least GEL 100 per blunder to tax inspectors and therefore business is supposed to pay about GEL 150 if they want to bribe him. And since inspectors will change per week it comes out that they have to pay GEL 150 per week that ultimately exceeds the penalty rate in a month as penalty stands at GEL 500 not more. If entrepreneurs want to pay that much let them pay, I never

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