Issue 2, 2013. April-May


"A NON-AGGRESSIVE, FAIR APPROACH TOWARDS TAXPAYERS" speaks with Lasha Khutsishvili, the new head of the Revenue Service, about new plans and how they will affect tax payers.

Maia Edilashvili

Since January 8, Georgia has a new head of the Revenue Service (RS), Lasha Khutsishvili. Previously, he worked at Ernst & Young LLC Tbilisi Office and the Council of Tax Resolution at Finance Ministry, respectively.

Q: What needs immediate changing in this field at both legislative and administrative levels? What is the short- and long-term plan for the RS?

A: It's important to eradicate the possibility of double interpretations in the Tax Code. We are working on this actively and, in the near future, we will make certain changes public. At the same time, RS is introducing a non-aggressive, fair approach towards taxpayers. The number of sanctions against violators is on a decline. We are working to provide descriptions for certain articles so that tax payers understand them easily.

Given the rigorous cooperation with the EU on Deep and Comprehensive Free Trade Agreement, we consider it significant to harmonize Georgia's tax and customs legislation with the EU's legislation. It's urgent that all stakeholders - state agencies, the business community, and experts - are engaged and public discussions are organized on such topics.

Q: Considering the revenues in 2012 and in previous years, what were the most remarkable trends last year in terms of tax collection?

A: In 2011, we introduced cash-registers for cash payments and started using GPRS systems, which allows the receiving of information online for transactions made on the cash-registers. Since 2012, we have had access to information on the commodity invoices of taxpayers, while previously only information on VAT payers' commodity invoices was available. These measures have simplified tax procedures, made the revenues of taxpayers transparent, and at the same time simplified tax administration. Finally, all these have positively impacted on tax collection figures.

Q: Prior to the elections, the AmCham Commercial Law and Tax Committee communicated with the RS about the need to reduce the frequency of changes to tax legislation, and introduce ad hoc, mid-year effectual dates of tax legislation. This would increase the predictability of the tax law, greatly reduce legal and accounting risks for Georgian companies, and greatly reduce their legal and accounting expenses. Would you support such reforms to the procedures for adopting tax legislation?

A: Concerning the procedures for adopting tax amendments, such an initiative is acceptable and, yes, we would support it.

Q: Will you have a new strategy to keep taxpayers informed about what you are doing? How they can administer their business in a more comfortable way?

A: There is a plan to send taxpayers electronic messages about the legislative changes. We are also discussing the possibility of informing taxpayers in advance about planned tax inspections throughout the year, which would allow them to prepare their documents beforehand and correct any loopholes in tax auditing such as declarations and accounting. On our web page we post leaflet-style brief instructions. We constantly arrange meetings with taxpayers in the frame of our "open door" format, both in Tbilisi and in the regions. At such meetings, RS representatives unveil the changes to the tax code and answer questions concerning tax and customs regulations. After the meetings, we study the questions and consider initiatives proposed by the participants. In addition, in the customs offices, informative leaflets in Georgian, Russian, English, Turkish, Armenian and Azerbaijani are available.

Q: The previous government instituted a practice of issuing draft tax claims, and then allowing the taxpayer the opportunity to discuss the claims with the RS before the claims were issued in an official tax collection act. Do you intend to continue the mediation practice of the previous government? Could you improve it by establishing a stronger and more permanent legal basis for it?

A: The mediation process will go on and, in the near future, there is a plan to introduce an amendment at the legislative level on increasing time for the initial consideration of the draft tax claim. Currently, taxpayers have the opportunity to submit a written claim about their position on the draft tax inspection act within five days, which is not enough time for formulating one's position comprehensively. We plan to increase this period to 10 days. At the same time, without undergoing the mediation process, the tax authority will not be allowed to impose additional taxes on a taxpayer as a result of the tax inspection.

We are also working to introduce electronic registration of complaints and tax resolutions. This format will allow the possibility of putting draft tax claims online so that taxpayers have the chance to make decisions online.

Q: Under the previous government, a number of tax agreements were reached with companies in Georgia (businesses like these tax agreements as they give certainty to their tax positions). Will it be possible for companies to conclude tax agreements during 2013 and beyond?

A: The tax agreement process can be continued but not in the form which existed previously. Currently, we are starting to discuss applications by taxpayers who propose to pay no less than the core volume of the tax in order to reach agreement.

Q: One of the new services offered by the RS is Prive, a personal service package. Can you give us some details, and name the advantages of this service?

A: Within this service one gets a personal tax consultant, who studies the individual needs of the taxpayer and assists him/her to identify the tax obligations. This service aims to help taxpayers evade violations. Up to 300 organizations currently use this service, mostly large businesses. According to IPM - an independent consulting company - 96.1 percent of the taxpayers said they would continue touse this service in the future as well. This figure confirms that PRIVE is a consumer-oriented service.

Q: The Trade and Transportation Committee at AmCham requested the Georgian government to introduced the EU legislation's provision which makes it easier for foreign investors to come for residency and bring their personal items. They adopted this regulation but made another entry restricting it only to diplomatic people and investors of importance. Should the business community expect a change in this particular regulation?

A: If a non-resident person crosses into Georgian territory temporarily (for a work assignment or work contract) his/her personal belongings get cleared in a simplified manner (under Article 45 of Decree #290 by the Finance Minister). Any business person can take advantage of this regulation.

Q: Will there be any change concerning the function of the Customs Department of the RS? Will the procedures become cheaper, for instance?

A: RS has already cancelled or cut some service fees. This trend will continue in the future. In our opinion it's important that, in the revenue service, customs procedures are administered comprehensively by one department, rather than by several departments as it is today. This would increase the efficiently of customs control and service for the consumers. Accordingly, there is a plan to bring the functions of various departments of the RS into the Customs Department, which is aimed at better implementation of customs control.