CSOs Evaluate Legal Problems

NGO legal barrier survey results

Georgian Business Law Center (GBLC) has published legal barrier survey results, which lists major problems in current legislation that affect non-governmental organizations’ development. The survey was done within the framework of Citizens Advocate! Program (CAP) and includes the opinions of ten legal experts, as well as 51 CSOs in seven cities of Georgia.

Results show the legal environment regulating CSOs development in Georgia is satisfactory, but is far from perfect. As it was anticipated the main problem is connected to implementation of the taxation legislation.  The survey also showed that the implementation problems vary from region to region, depending on policy pursued by the local administrations and tax authorities.

Compared to the neighboring states, the experts noted that the CSO-related legislation in Georgia is of an acceptable quality, however it still fails to compare well with the legal acts of the most developed democracies. Experts say one of the main obstacles is in subsidiary legislation that overburdens the CSOs with regulations and blurs the concepts provided in laws. They have also noted that the Civil Code – main legislation that regulates CSO work – is adequate to the current needs. However, some noted that the restrictions on legal forms of the organization – an association or a foundation – no longer reflects the diversity of the CSOs in Georgia, which include think tanks, community based and charitable groups.

The civil society organizations that participated in the survey have also mentioned that the Civil Code’s restriction on organizational forms is inadequate and should be expanded. But mainly CSO representatives spoke about the shortfalls in taxation legislation and, especially, in its implementation. Some CSOs noted the difficulties created by the law on press and freedom of speech. Others stated the law on children’s rights would be a positive step for their activity.  

Both experts and CSOs agree that there is no need to establish a special administrative body to award the charitable status to CSOs. Majority of the experts say such an authority would create obstacles in development of CSOs and will allow for bureaucratic manipulation. They say tax benefits should be awarded to the activities implemented and not be identical with the charitable organization status.

One of the most persistent problems in legislation is that the government fails to reimburse the paid value-added tax (VAT) to non-governmental organizations, as it is required by the tax code. The budgetary shortfalls are the often-quoted reasons for this violation of law.

37% of the CSOs surveyed said that could not reimburse VAT, 8% did not demand it and 23% managed to reach an agreement with the tax authorities, that the amount owed by the state would count towards the income tax payable by the organization staff. Such irregularity in policy certainly creates difficulties and the loopholes for corrupt deals.

The survey found that civil society representatives differ in their degree of knowledge of the relevant legislation. The level of awareness usually correlates with the number of the CSOs in a given region and the level of development of their network. Still, the need for raising the levels of legal awareness exists in all regions.

66% of CSOs named consultations with other non-profit organizations as the basic source of legal information. Representatives of CSOs do not trust employees of tax and revenue departments and say they are incompetent or not interested in providing accurate information.

“As the results of the survey show, providing legal information should be addressed by the sector itself”-Lali Bakradze, GBLC expert, says. “Changes are also advisable to certain laws regulating press and freedom of speech. At the same time attention should be paid to the law on charity as the [CSO] sector is searching for the new ways of fundraising”-she added.