15 December, 2011

Georgian government became really business-friendly after it realized that milder tax burden brought bigger budgetary revenues this year, Giorgi Pertaia, Tax Ombudsman of Georgia, believes. For many years Georgian businesses have been requesting  to set up Tax Ombudsman’s institute but without success. It came true  at last  last spring according to the initiative of the Prime Minister of Georgia, Nika Gilauri, who early this year pledged to keep close cooperation with businesses and tailor tax law to their interests. Whether or

not the government kept its promise and the Ombudsman’s Office met business’ expectations, Georgian Journal tried to find out in the interview with Giorgi Pertaia himself.

Q: Tax Ombudsman’s institute has been established at last this year. Business that has been craving for fair treatment on side of tax administration cherished great expectations. How has your office met expectations, is awareness high in business community?

A: Awareness is quite high and a large amount of people appeals for help, at least ten calls come in the office at hot line, much more calls to get consultations through our hotline, web-page and Facebook, we are available even on week-ends at Facebook. About 800 persons appealed already. We carried out a research recently that made clear that about 80% of researched companies know us and about 70% is ready to appeal for help if they face problems.  To my mind expectations are met as far as we have quite different picture in tax system at the moment compared to past years, and our office greatly contributed to it. But our efforts could be futile if not new tax administration management and policy because we are not decision makers, we just recommend. Government apparently changed its political will and comes on many of our suggestions. Some lingering taxation related problems like timekeeping, inventory, fuel deduction and production wastes are somewhat solved, not completely but from administration point of view the issue is apparently eased.

Q: Liberal changes were made to tax code before but administration remained as the Heel of Achilles. What makes you think administration gets simpler and new changes will be effective?

A: I have been involved in tax code issues for about last eight years but it is the first time when I do believe it will be effective, that they are not PR actions but real changes, because earlier law was changed in a good way but there remained gaps enabling  administration to be enforced incorrectly. Now there are some gaps in law but administration does not use these gaps to fine business as much as they used before. Nobody can work out a flawless tax code without gaps anywhere but administration should not be focused to choke business. And this seems improved. For example, the inventory-related paragraphs enable to fine all shops today but administration does not while earlier even smallest gaps were used maximally to impose penalties on business. Although government still comes with some changes that are controversial to the business-friendly policy they practice lately, not as frequently as earlier but they still do exist and puzzle me. The change to paragraph number 73 of tax code on indirect tools of imposing fines that is under parliamentary vision at the moment is so intricate and unclear that it unties hands to tax administration to impose millions worth fines.

Q: Small business feels discriminated about new cash registers that revenue service promised to deliver free of charge but some got them free and some have to buy. How do you think to assess this move?

A: Actually it is not fair because new cash registers ease life to tax service to have better control and only in theory it is better to business assuming that if tax service has better control it will seldom trouble business, but to lay the burden of payment on business for improved control mechanism is not fair, we discussed this issue with tax service but they stick to their position unfortunately.

Q: What makes you think government changed its policy then?

A: The biggest good thing that happens due to the underway new policy is that government got convinced that the milder tax burden leads to more profit not loss as their perception was before. We have been urging government to reduce tax burden for years assuring that income increases through increased economic activity, but counter-argument was that profit might occur after approximately 4 years and budget could not afford it. However this year they reduced burden and incomes increased likewise and they witness that it is a good thing. It is a breakthrough in governmental attitude and that the good result occurred in a year instead of expected four years, therefore it is a no-no to get back to old reality.

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