Georgian Business Ombudsman Assesses 2011 as Encouraging
17 May, 2012
Georgian Business  Ombudsman Assesses 2011 as Encouraging

Taxpayer Ombudsman of Georgia largely known as Business Ombudsman finds the year of 2011 as positive for business thanks to improved communication with the state and liberalized tax law, although he thinks government should slow down amending tax law that causes discomfit to business.



Giorgi Pertaia, Georgian Tax Ombudsman, reported to parliament achievements and challenges of Businessman office after a year of existence of this institute that was introduced by the new tax code put in forces staring January 1st,

2011.
Pertaia believes the so called Business Ombudsman institute created as a mediator between the state and business sector justified expectations for business is happy. 882 businessmen appealed for help in 2011, 138 recommendations were worked out for government and 54% of these recommendations were envisaged including as long time lingering problems as amnestying controversial aged tax duties that were not recognized by tax-payers, exemption production losses from tax, deducting fuel costs as expenses etc. 
According to Pertaia, 2011 was a positive to business bacause approach toward business changed radically  and several new business-oriented projects were inactivated at Revenue Service (RS) like alternative audit, enabling business sector to pay taxes based on private audit company findings and not through the controversial RS audit; private tax inspector who supervises cash registering at trade outlets largely eluded before, fines reduced by 31% in 2011 compared to 2010, fine rates also were trimmed and instead of instant imposing of fines now RS gives certain time to tax-offenders to this improve the infringement and so forth. All this increased trust of business toward the RS, Pertaia believes. 
One of the best samples of the  improved communication between the state and business as Pertaia finds it is creation of  mediation council [with the Audit Department of the RS] that discusses tax duties that tax-payers do not agree before the order on imposed tax duty is issued. As a result 18% of excessively imposed taxes were canceled before the act of mediation council was issued. Another good thing to Pertaia was creation of business council with parliament and Council of Auditors set up at the RS that is staffed by representatives of the RS and auditor companies that discusses initiatives of the RS so as to streamline taxation methodology ultimately. 
However Pertaia indicates that it is generally big business involved in this communication thanks to their better organization while small and medium businesses still have less voice.
What still embarrasses the business is frequent changes in the tax law. Although a reformed and new tax code entered into effect in January of 2011 there were up to 300 amendments made to almost all paragraphs of the code during entire 2011 while some paragraphs were changed several times like for 8, 10 and even 12-fold.
Although these changes were requested by business such frequent amendments still embarrass entrepreneurs for they are permanently searching whether or not something has changed in the tax law that creates setback in planning and management affecting business climate ultimately. Therefore Pertaia recommends government to implement changes only once per quarter or twice per year.
Another key challenge is regulating important issues through secondary legislation instead of building them in the framework law.
“One of the most conspicuous samples of this is regulating customs procedures definition through law enactments instead of the tax code,” Pertaia said and recommended to solve this problem.
He pledges to go ahead with supporting better communication between the state and business this year, warns businessmen to be careful to enter the enticing but risky Russian market and implement their exports there through international trade terms only to avoid losses again as some suffered when the market closed in 2006.
Davit Narmania, Executive Director of the Caucasian Institute for Economic and Social Researches, thinks introduction of the Business Ombudsman met expectations on the side of tax law improvement but he would like him to have stronger power in settling tax disputes where Tax Ombudsman may only make recommendations at the moment.   
Irakli Lekvinadze, an economic analyst, thinks Georgian Tax Ombudsman is a functionless body in fact for it did not react on the sorest problems like large scale infringements of property rights throughout country, governmental initiatives affecting overall business climate as it extended access to confidential business information to banks, accountants, and auditors etc, also small and medium business is not involved in legislative procedures.
“Tax Ombudsman cannot be effective for he has to oppose the one who assigns him in fact [Prime Minister assigned Tax Ombudsman to post], he should be chosen by business itself, then it can be effective,” he said.

 

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