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Tax Amnesty to Vivify only 5% of Suspended Companies But this is Encouraging Figure Anyway

From January 1, 2013 to September 25, 2018 the Government of Georgia has written off debts of 3 117 219 960 GEL from 65 604 taxpayers.

After amendments to the Tax Code came into force on August 1, 2018, a total of 10 690 taxpayers were free of  tax debts of 325 147 262.40 GEL. The Commersant has requested the information from Revenue Service.

According to Revenue Service, the tax debts were pardoned on the ground of both private initiative and taxpayer’s application. The process of writing off debts will be continued.

The Caucasus Business Week has inquired what consequences the tax amnesty will have on state economy and how pardoned debts will influence the business sector.

Zurab Lalazashvili, managing partner for BDO, explains that amnesties encourage dishonest taxpayers.

“In general, I have negative attitude to writing off debts, because we encourage tax evader companies. If companies do not agree with the tax, they should be able to sue the decision and the debts will be decreased through the Board of Disputes.

Some companies feel that unjust decisions are made.  When these debts are written off from so many companies, the feeling of injustice arises for businessmen, who pays all taxes timely.

Frequently, overdue loans are pardoned. In reality, the Authorities cannot collect these debts and similar money cannot make influence on the economy. When a company has suspended operation for 3 years and it does nothing, the pardoned debts cannot add any benefits, however, I think, in this case, the debts may be written off, but very carefully and in exceptional cases, to shape healthy competitive environment”, Lalazashvili said.

Paata Bairakhtari, vice president of Association of Young Financiers and Businessmen (AYFB), says that the Authorities should help companies get rid of problems because one suspended company signifies at least tens of unemployed persons, reduced GDP and so on.

„When we talk about writing off debts, this signifies that companies cannot pay the debts. Frequently, after similar pardoning, companies resume production. Naturally, we have such cases when companies cannot continue production even after loan pardoning. The main thing is that business process not be suspended because of debts”, Bairakhtari noted.

The AYFB vice president also mentioned the Omega Group case with 50 million GEL debts accrued for 3 years.

“According to my information, the Government postponed tax payments to Omega Group several times. At this stage, the Authorities should use available mechanisms to assist the company. No business company is to suspend operation in Georgia. The Authorities should do their best to prevent business companies from suspension of operation.

I would remember one of the major campaigns in this direction, which commenced when Irakli Gharibashvili was Prime Minister. I imply development companies and suspended construction projects, where huge tax debts were pardoned.

If we analyse indicators of the following years, we had good indicators in development sector and this tendency was maintained for many years. Objective of the preferences and pardoning was to encourage the economy and vivify the suspended business. The Government believes that pardoned taxes  enable suspended business companies to become potential taxpayers in the future”, Bairakhtari noted.

TechnoBoom founder Anzor Kokoladze says the suspended companies will have the chance to resume operation and this aspect will promote Georgian economy.

“When one company honestly pays taxes, but another ignores taxes and the later is written off debts, naturally, the first company feels injustice. At the sae time, when you realize that the tax amnesty frequently refers to companies that have suspended operation for many years, then the feeling of injustice disappears. This money was lost for the state budget anyway, while tax pardoning gives a chance to the companies to resume operation. I think only 5 % of similar companies resume operation, but I welcome even them anyway”, Anzor Kokoladze said.