Amnesty in Exchange of Repaying Tax Arrears
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Representatives of big business have to |
President Mikheil Saakashvili, Prime Minister Zurab Zhvania and other government members met with the representatives of big business on March 6 to present the Finance Ministry-elaborated draft law on “Declaration of Previously Hidden Taxes.”
Under the new proposal, the businessmen should fill in the declarations on taxes, which were hidden for past 6 years, until July 1. The declarations will be reviewed by a special commission, consisting of the representatives of the Ministries of Finance, Economy and Justice, as well as business circles.
Those firms, whose undeclared taxes do not exceed GEL 1 million (USD 500 thousand), will enjoy financial amnesty. However, those with arrears of more than GEL 1 million will have to repay 10% of the total debt until 31 December 2004. The payment of remained arrears will be rescheduled within 5-15 years through the agreement with the Finance Ministry.
“The declarations submitted by businessmen are confidential. In case of submitting inaccurate tax declaration, a taxpayer will be persecuted in accordance with the law,” Finance Minister Zurab Nogaideli told Civil Georgia, adding that the draft law should be acceptable for all those businessmen, who want to make legal business.
“Not a single [state] agency will have the right to probe the property of those businessmen, who take into account the new rules of the game,” Premier Zurab Zhvania told the businessmen.
The Prime Minister also said that the taxpayers, who will be obliged to pay previously undeclared taxes, will also have to pay their ongoing taxes honestly. “Otherwise, the agreement over rescheduling of the previous debt will be canceled and [the businessmen] will be punished,” he added.
“Our aim is not to achieve fiscal goals through this draft, but to legalize business in Georgia fully once and for all,” Zurab Zhvania added.
The draft law does not apply to those businessmen, who have already been charged for tax evasion. For example, this initiative will not apply to Gia Jokhtaberidze, son-in-law of ex-President Eduard Shevardnadze. The co-owner of the Georgia’s biggest mobile phone company MagtiCom was sentenced to three-month pretrial detention. He is accused of misappropriation of GEL 750,000.
President Saakashvili said that the government will try to make those who have already been charged to reimburse allegedly misappropriated funds.
“My aim is not to have them rot in prison. My aim is to have them give back what they have stolen. And let them go to hell,” the President said.
Those persons, who have hidden less than 1 million Lari from the state, will not have to pay any taxes. As the President said, such persons make about 90% of taxpayers throughout Georgia.
The representatives of big business, who attended the meeting with the President and the Prime Minister, said that the draft would need some clarifications.
“There are several unclear issues. For example, how should one define what amount of money was hidden from the state budget,” Zaza Sioridze, former Chairman of the Parliamentary Committee on Taxes told Civil Georgia.
“Principally, the draft law is acceptable; however there are many questions that need discussions and clarifications,” Vano Chkhartishvili, former Economy Minster in Shevardnadze’s government and owner of Tbilisi-based Mze television, told Civil Georgia.
However, adoption of the liberal tax code is the businessmen’s major demand. “This proposal is OK, but more important is a new taxation system,” Badri Patarkatsishvili, an influential tycoon, who owns media holding Imedi, told Civil Georgia.
The Finance Ministry reported on March 2 that the budgetary targets in February were successfully met and the budgetary revenues were collected with surplus. As the Finance Minister Zurab Nogaideli said “the strict and improved tax administration and tax collection made this trend possible.”
However, the experts say, if the current code is not changed, it will be a major blow for a small and medium business.
“Tax code should be simplified. Under the current code, the tax burden is too high. As a result we have 70% of shadow economy. In order to avoid this, the code needs to be simplified,” expert in Georgian economy Vazha Salamadze of Business-Law Center told Civil Georgia.
Tbilisite Keti, who owns a small restaurant in downtown Tbilisi, says that during the recent months she paid more taxes than ever before.
“The tax official became very strict and it is almost impossible to bribe them. But taxation under the current law is terrible. Now I have to pay more than ever. If this continues, I will have either to raise prices or to suspend a business, since it is impossible to work under the current taxation system,” she told Civil Georgia.
The authorities vow to adopt new tax code and ask businessmen “to be patient until then.” President Saakashvili said the new draft tax code will be ready by May.
“I know that it is very difficult to work under the current taxation system. But I urge you to wait for three-four months and pay taxes honestly,” Mikheil Saakashvili said at the meeting with Georgian businessmen.
The representatives of big business will have to accept the new rule of the game offered by the authorities. They simply do not have better alternative.
“Everybody should accept these proposals. Otherwise, we will face criminal charges,” Chairman of the Taxpayers’ Union Niko Lekishvili said.
“See you soon in a jail” – this was an often heard joke among the influential businessmen during the meeting with the country’s leadership, which reflects current general mood of the Georgian business.
President Saakashvili told businessmen trying to allay their fears, “we do not intend to take anything away from you. Businessmen’s property is inviolable whether or not it was acquired through tax evasion.”