Issue 5, 2012. October-November


CLT COMMITTEE’S FIRST YEAR SUCCESSES, PLANS FOR THE FUTURE spoke with the co-chair of the CLT Committee Ted Jonas, a member of the AmCham board of directors and managing partner at DLA Piper, and George Welton, the former executive director of AmCham, about the committee's accomplishments in 2012 and its plans moving forward.

Over the past twelve months, AmCham's Commercial Law and Tax (CLT) Committee has been a strong lobbying force for businesses, advocating for better tax practices and working with the government to ease legislation that hurt the business community.

The committee was created after AmCham received a grant from the United States Agency for International Development (USAID), EWMI, and EPF, within the Judicial Independence and Legal Empowerment Project.

Ted Jonas, a co-chair of the committee, noted that a major early success was that the committee helped to convince the government to withdraw amendments to the tax code and the judicial enforcement law that were jeopardizing Georgia's strong banking sector. This happened because the new amendments undermined the previous system for the priority of loan collateral and therefore made it harder for banks to lend money confidently

"I believe we were the key actor in getting the government to withdraw the amendment to the law that had given super-priority to tax liens over bank liens and which was not only potentially - was actually -- becoming very disruptive to the whole banking sector," he said.

AmCham's CLT committee worked behind closed doors with a half dozen government officials, using research and analysis to convince them to change the amendment.Some government officials were openly supportive of repealing the amendment.

"We gave them suggestions for legislative language, we gave them justified position papers when they claimed the law was adopted from other countries," Jonas said. "So I think that was very key."

In addition, the committee has become a forum for businesses, auditors, lawyers, and accountants to discuss problems with the tax code - and has turned into a key liaison between the business community and the Revenue Service.

George Welton, a former executive director of AmCham, who helped start the committee, noted that the Revenue Service was extremely receptive to working with the committee. One key demonstration of this relationship is that when the revenue service started writing commentaries to the tax code, they asked the committee to help prioritize which articles of the tax code should be explained first.

Central to the success of the committee, Welton argues, is that it has taken a very pragmatic approach to engagement. "You are trying to figure out those issues and the areas which you can realistically push for change. It is not just 'what is the problem' but 'what is a problem where lobbying will be effective' ," he said.

"Where we have clear and demonstrable impact in that was...on the clarification of certain issues of the tax code."

Jonas noted that writing commentaries for the tax code could help businesses avoid tax penalties based on poor interpretations of the code by taxpayers and inspectors.

The committee is now in the process of "boiling down" an intense analysis of problems businesses face during the process of disputing tax claims so it can offer the Revenue Service concrete recommendations.

Post-election, Jonas said the need for the committee is even larger than before.

"We need to watch very closely whether the new government is going to bring about an improvement in the rule of law, particularly in the independence of the courts and in the use of due process in tax collection and administrative proceedings," he said.

"As always happens when a government changes, they might have a desire to investigate alleged illegality in the previous administration and this will be a critical test case to see they do that legally, using due process. This is important to the business community so that the business and economy of the country will not be disrupted. The best thing the new government can show Georgian and international investors is that they are going to respect the law and the independence of the courts when they pursue their agenda".

The AmCham Commercial Law and Tax Committee was started and staffed with the support of East West Management Institute and Eurasia Partnership Foundation as part of the USAID Judicial Independence and Legal Empowerment Project.