Categories
Journalistic Survey
Articles
Reportage
Analitic
Photo Reportage
Exclusive
Interview
Foreign Media about Georgia
Editorial
Position
Reader's opinion
Blog
Themes
Children's Rights
Women's Rights
Justice
Refugees/IDPs
Minorities
Media
Army
Health
Corruption
Elections
Education
Penitentiary
Religion
Others

Georgian Reforms: Benefits or Not, & “Who Really Benefits”

July 1, 2008

Shorena Kakabadze, Kutaisi

“My last visit to Georgia was sad. Nothing worked in this country; there was no light and people were afraid to go out in the street. I discovered that people return home at 3-4:00 PM instead of 6-7:00 PM as they should arrive home before it gets dark. That’s why I always avoided to arriving back to Georgia and preferred to invite my relatives to my home outside of Georgia. However, after many years I arrived in Georgia in 2004 and found out that nothing had been changed. The country was still in frozen situation and face dire economic conditions. It is like seeing your house without windows and with ruined walls. It is only natural that the first idea that comes to your mind is to renovate the house. However, it is not a valid question to go the next step and ask as whether or not I should redecorate the house or not?  This was the assessment of Kakha Bendukidze, the head of the Prime-Minister’s Administration about the urgency of structural and economic reforms.

“The question-why reforms were to be implemented?-should not be asked again.”

People have serious problems as to the background of the much touted reformer Kakha Bendukidze, and especially in his pathos – and way of perceiving the world.  Regardless, then former Minister of Economy complains that people cannot admit how much progress has been in Georgia. However, he is pleased with the results of reforms and the official statistics as what and when that reform was carried out.

The results are easy to observer and if we do not believe ordinary citizens then we must trust experts who speak about everything in a very simple language. As for statistics, Esmen Embord, President of American Chamber of Commerce, explained: “There are three inherent lies -great black lie, small white lie and statistics.”

Neither experts trust statistics; they always prefer to speak with facts, however, as soon as they start a conversation about tax reform they their attention is focused on its positive sides.

What is the positive on the Tax reform that was one of the most outstanding one among recent reforms? The list is quite long: the number of taxes was reduced from 22 to 8; the amount of taxes was also reduced-(income-taxes of physical entities were reduced from 20 to 12 %; VAT was cut from 20 to 18 %; profit-tax for legal entities was reduced from 20 to 15 %); A new system of enterprise registration started to function in 2007. according to which the registration can take place only at Tax Agencies. Conditions for the establishment and registration process of enterprises and introduction of “one-shop principle;” new system of the introduction of tax declarations will start in 2008 have all been simplified

“Reform is good when people are satisfied but who cares about the people? Today they argue with me about my property and simultaneously they are claiming that the reform has been successful. How can I state that the reform was implemented for me and other people like me, especially when I face problems on a personal level,” asked Tato Dvalishvili, director of the “Birzha Rioni Ltd”. Kutaisi City Hall tries to deprive him of his property rights. Officials from the City Hall claim the “Rioni” registered the property illegally. Though there is a decision from the Georgian Supreme Court about the legality of the property.

Implementation of the tax reform started in 2004. Georgian reformers consider it the most radical among all reforms implemented in tax field anywhere in the world. Besides, they draw attention to the fact that the reform is going-on and innovations are still being introduced in the process.

“Logic is most basic, even simple: it goes that the state created all conditions for entrepreneur-tax-payer to carry out simplified procedures, and now it is your civil obligation to come and pay your taxes. Maybe, it is difficult for people to stay up with the innovation and adopt them but eventually they will become accustomed to everything and in the end  everybody will be satisfied,” said Amiran Tavartkiladze, deputy head of the Service Division of the Tax Department.

There is simple reality that basis for the economical progress of the country, which is based on private business and its development. Our governmental officials often repeat it, and regardless, Georgian society remembers the incident about one of the largest companies in Georgia, Art Group. The company was run by the close friend of Irakli Okruashvili, former Minster of Defense, and who later opposed the central government. Initially, the financial police raided Art Group; then the ware-house of the company was burned to the ground. Coincidence or not, people are still suspicious about that strange fire. “While Okruashvili was close to Saakashvili, nobody raided the company. However, the fire took its toll, the circumstances were perceived as a very casual event in Georgia,” as just ordinary people think.

“Reforms cannot be implemented in the country where business is under threatened. Why should I open an entity if I know that some governmental official will come and demand a share from it? I’d rather never run business in my lifetime,” told one respondent who preferred to remain anonymous. He intended to open a small enterprise several months ago but he gave up the idea when they told him he could do it only after he agreed to pay a share of the proceeds to a certain person.

Despite this, as well as other supporting facts, reformers directly state that economical situation in the country has changed to the better, and how this is the direct result of the much needed implemented reforms. “If not those reforms, Georgia was running towards an economic disaster and we even faced the danger of being completely wiped off the face of the earth.”
 

News