The only beneficiary _ audit companies
09 June, 2011
The only beneficiary _ audit companies

The pilot project of the government initiated alternative tax audit; the presentation will last till the end-of-year. The alternative tax audit autorizes private audit companies by tax audit right and enables business to opt between private and state tax control. However economic analysts question the idea that does not fall in line with the best world practice. They fear audit companies are supposed to be the only beneficiary of alternative tax audit.

Pilot alterative tax audit project launched officially, 12 audit

companies and 12 companies were shortlistsed as project participants and number of audit companies is supposed to increase to 25 by the end of the year however the full normative legislative framework that must regulate the alternative tax audit concept is not worked out as yet. Due amendments made to the tax code were approved last week but the order of Minister of Finances that should outline  audit companies shortlisting criteria as well as other essential details of the venture is lagging behind. The official explanation is “emergency” or to allow business enjoy benefits of alternative audit as soon as possible.

The governmental understanding is that private business has better trust in private audit companies than in tax officers and prefers to be audited by private auditors. Therefore it introduces alternative tax audit and enables business to opt who will check their financial papers tax officers or private auditors. The protocol of private audits will be equalized with the tax service protocols, and the tax service will check the privately audited companies once in three years.  Moreover, companies can write off part of penalties if they appeal to private audit service.

“Our goal was not to delay the pilot project to see the practice that will show possible problems and approaches,” Jaba Ebanoidze, Head of Revenues Service Department of Ministry of Finances of Georgia, said during the pilot project presentation event on June 2, 2011.

According to him results of the pilot project will be as guideline to work out methodology of the alternative audit idea so as it would work smooth when will enter into effect starting next year. As yet the pilot project is based on agreements between the revenue service and shortlisted audit companies and audits implemented to the pilot project participant companies will be legalized. Audit/consulting companies were selected based on their experience and professional skills, Ebanoidze explained to Georgian Journal and most probably the selective criteria will not change. Two commissions are already created at the revenue service, one works on methodology of alternative audit, the other writes tax code case by case.

According to revenue service top officials, the alternative audit project has three key benefits: revenue service will spare resources, audit and consulting companies find a new market niche, and private companies will be exempted of penalties and tax inspections as the audit implemented by private auditors is equalized with the tax inspections.

Georgian economic analysts’ big question meantime is why on earth the well-paid audit department of revenue service financed from the state budget does exist? Why does it take money if private auditors will do their job? They think the private tax audit initiative is calculated on big business however even to them it is an extra burden.

Levan Kalandadze, an economic analyst, fears the initiative will be discriminating Small and Medium Entrepreneurs (SME) for small business can never afford such expensive luxury as private audit. Therefore, Davit Narmania, Executive Director of the Center for Economic Problems Research, thinks the “freed” tax officers’ crackdown is supposed to increase on SME.

Ebanoidze played down the fears. He assures tariffs for private tax audits will be differentiated and affordable to everyone. Besides their rates fall much behind the penalties business pays for infringements while alternative audit exempts from penalties.

“The companies that will audit big companies have higher criteria and their prices will be higher starting GEL 30 thousand. But there will be fewer criteria for auditing smaller companies and their price will be affordable. The price for medium companies most probably start from GEL 15 thousand and it will make just several thousand for smalls. It is more lucrative if compared to huge penalty business pays that accrues to several hundred thousand,” Ebanoidze told GJ.

Notwithstanding Narmania believes the only beneficiaries of the alternative audit will be audit companies and not business in fact as far as the expensive private audit is an extra outlay to any business irrespective of the size and even differentiated system is no relief to small business.

“The least price for auditing small business cannot stand lower than GEL 10 thousand, no audit company implementing audit for, say, GEL 4 thousand will be mandated to implement private tax audit because they have no proper skills. And I strongly believe no small business can afford GEL 10 thousand per year,” he said. “Thus audit companies will make money thanks to this here alternative audit, big business can enjoy slight preferences, and small business none at all. This is not the best world practice I have ever heard of any developed country exercising this practice.”

Other Stories
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
The New York Times: Bitcoin declines but Georgia still bet on it
The New York Times has recently published an article about reasons, challenges and causes of generating Bitcoin in the former Soviet country Georgia.
EU to allocate € 13 billion for Eastern Partnership countries, including Georgia
The European Union together with the World Bank plans to allocate investment worth € 13 billion for infrastructure projects in the Eastern Partnership countries.
Anaklia Port and its importance for Georgia
In 2016, Anaklia Development Consortium was authorized to launch the construction of Anaklia Port.
Cryptocurrency mining threatens electrical network in Abkhazia
In the breakaway region of Akbhazia rampant cryptocurrency mining is threatening the shaky electrical network, reports an article of the news portal EuroNet.
Caucasus Wine University to be opened in Gurjaani
In the Kakheti region a new viticulture campus of the Caucasus University is in the process of planning.
Photos describing life of the poorest in Georgia
Fight with poverty should be among top priorities of every government in every country.
Training farmers to rescue the organic hazelnut production in Georgia
Even drizzling rain and unpleasant gusts of wind can’t prevent the farmers from coming and participating in the agricultural training.
Bleak times for organic farmers in Georgia – but there is hope
Organic hazelnut production is a delicate plant in Georgia that has emerged just a couple of years ago. Various pests, among them the Asian stink bug Parosana, trouble hazelnut farmers and menace their livelihood – even before their businesses could really take off.
Hybrid car imports are going through the roof in Georgia
Thanks to their fuel economy, the popularity of hybrid cars is increasing in Georgia, where fuel affordability is low and prices for fuel are unstable.
The New Year offer from MAQRO Construction - Apartments with unbelievable discounts and the parking spaces for FREE!
Location, green yard, spaces for various needs, experience of the construction company and parking space are the main important criteria for potential buyers of apartments.
Interview with the co-founder of Kiwi Vegan Café – the first vegan place in Tbilisi
Behind the Kiwi Vegan Café stands a group of activists who wants to raise Georgian’s awareness for animal rights and welfare.
Biblusi opens first shop for tourists - Georgian
The largest book shop in Georgia Biblusi opens the first shop specially designated to the needs and interests of tourists and named it Georgian.
Georgia improves by five ranks in the Prosperity Index
In the overall Prosperity Index rankings, Georgia has climbed by 5 positions from 85 to 80 when compared to last year. As such, Georgia is the best performing country in the CIS zone.
The future is bright for electric cars in Georgia
The numerous hybrid cars in the streets of Tbilisi cannot be overlooked. Entrepreneur Sulkhan Gvalia calls them “pagers”, referring to the predecessor of mobile phones.
Georgia’s fight against the big tiny enemy – Asian Parosana
It’s a tiny creature, but the harm it did to the Georgian agriculture sector was and still is immense.
New cable route: from Kobi to Gudauri in 15 minutes
On the 15th of December, cable transport is scheduled to be opened connecting Kobi and Gudauri.
Tourist boom in Gudauri – majority of hotels are booked by foreigners
Gudauri is among the most popular winter resorts in Georgia.
Medical tourism increases in Georgia
In the last 9 months, Georgia was visited by 19 500 foreigners for medical and recovery purposes.
Doing business in Georgia has become easier than in America
According to the Doing Business 2019 report published by the World Bank, Georgia ranked 6th among 190 countries in terms of simplicity of doing business. This was an improvement over two ranks compared to last year.
Problems that foreigners frequently face in Georgia
The importance of Georgia as a tourism hub is growing year after year.
Tbilisi TV Broadcasting Tower – Better than the Eiffel Tower?
It is planned to renovate the Tbilisi TV Broadcasting Tower, one of the landmarks in the capital.
Georgian Fusion Menu by The Biltmore Hotel Tbilisi
5,895,914 international visitors have visited Georgia between January and August of 2018. Compared to the previous year the number has increased by 12.2 per cent.
Advertising of gambling and lucrative games may become banned in Georgia
Advertising of gambling and lucrative games may become banned in Georgia. Those who violate the new rule would be fined GEL 10 000.
Lebanese café-lounge Beirut opens in Tbilisi
What is necessary to organize an unforgettable event? – Fun, emotions, lots of surprises, good music and delicious menu.
GEL Exchange Rate
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
February 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