Easier Access to Tax Information Affects Business Environment
23 February, 2012

Enhanced access to confidential tax-related information grants government with an easier business- crackdown tool in the pre-election period, thus affecting business climate of the country.

 

All executive bodies and public law entities get a direct access to confidential information of taxpayers.  A bill empowering governmental institutions by this competence has already entered the legislative body early this February and is supposed to be approved within a month as the parliamentary procedures allow. According to the currently valid legislation, tax service is

the only authorized body to get full information on taxpayers. Any information except the name and legal status of tax-payer, as well as its address, identification number and public information registered at the registry of entrepreneurs and non-commercial legal entities are kept under secrecy starting the day the tax-payer is enlisted at the Revenue Service (RS).

And the tax body including its officers or invited experts all ought to observe the tax secret they learned during implementation of their duties. The tax service is authorized to disclose the questioned confidential information only to the Ministry of Finance (MOF) employees and members of Dispute Council of MOF, law-enforcer bodies, court, tax services and any other state based on international agreements, National Bureau of Enforcement, national statistics service, Chamber of Control or any other executive body based on court decision.

Now the bill empowers all executive bodies and public law entities to get the tax-related confidential data bypassing court if they need this information to implement their competence.

Economic analysts disapprove the changes as they make governmental interference in business easier. They apprehend that the easier is the access to commercial secrets the simpler and bigger is the chance to crack-down on business. Analysts ascribe changes to the pre-election period as this is a year of parliamentary election and believe government needs easier tools to press on business in order to raise money for the election financing on the one hand, on the other hand, to undermine businesses financing opposition parties.

Irakli Lekvinadze, an economic analyst, thinks this here change is a follow up of the changes government undertook starting end of the past year [enhancing competence of the central bank allowing it to supervise even attempted deals at financial market as well as seizing the right of tax lien from banks in favor to tax service] in order to strengthen governmental regulation so as to get a control over businesses that affects investment climate of the country ultimately.

“This here and all the changes made lately with regard to the business are related with the election process. They make state regulation stronger and press on business, and whatever liberal environment and low tax rates we offer to investors they cannot outweigh this kind of legislative changes and it will only affect Georgian business environment,” Lekvinadze said. “This changes will not be reflected on Doing Business rating [of the World Bank ranking Georgia among top reformers] but no investor enters in the country without in-depth analysis and when they zoom in the image they will see all the legislative loopholes in  it and will be scared off.”

Ditrikh Muller, a market analyst with Georgian Investment Group, does not rule out red-tape to be increased and businesses activity dwindled as a consequence of enhanced access to tax secrets.

“Since all executive bodies and public law entities will be empowered to require confidential information the red-tape and paper-work will suffocate business and things will be getting like they were before Rose Revolution and we’ll get back where we have started: when any willing governmental body would come and inspect a business imposing unfair penalties. Meantime penalty schemes are quite sophisticated and they can be applied not only for not delivery of information but for alleged breakage of delivery deadlines, also they can “find out” faults in paper-works and so forth.  And when 5-6 inspection rout a company I do not rule out that number of businesses will be closed downs not surviving through infesting penalties. That’s an excellent tool to undermine any business,” he said in the interview with Georgian Journal.

He cannot have an exact grip of the changes why on earth government needed much easier access to tax secrets than it had before through courts completely controlled by government, as it is an open secret. He doubts that this change serves to collect money from business through penalties to finance the pre-election campaign.

“But all the recent changes including this last one deteriorate business climate and economy will be a victim of politics, and all these reformatory steps government took before will be annulled eventually,” he regrets.

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