The Rights of Taxpayers Violated in Georgia

Shorena Kakabadze, Kutaisi

“Two things in life a person can’t escape – death and taxes,”- the author of these words is one of the founding fathers of American democracy, Benjamin Franklin.  “I know that I must pay taxes and I pay, but unfortunately, it is not enough and that as a taxpayer my rights are not protected in this country,” these words belong to a Georgian businessperson.

Recently developed events in Georgia showed that the businesspersons (taxpayers) often complain that their rights are not being protected. The opinion polls conducted by various organizations confirm such an allegation. Human Rights Center Kutaisi Bureau put one question to people: in which sphere do you see the most instances of human rights being violation? The answers of the respondents were as follows: in penitentiary institutions, the healthcare system and in business.  Citizens indicate that instances of businesspersons being intimidated are rather frequent. They claim there is no mechanism that would protect proprietors and taxpayers from having to face such situations.

“Today taxpayers have only one inherent right: to pay taxes. They are practically deprived of other rights. The previous Tax Code was prohibiting the tax inspection entering the property of a taxpayer and take cash from his/her cash box. The inspection had to go through some procedures: first tax inspection was obliged to apply to a court for a search warrant and prove that there were legally obligated arrears to be paid.  The appeal had to be based on a tip, informed information. However, even based the best knowledge, it was first necessary to obtain a warrant, which permitted the inspection to seal the territory and carry out an inspection of the place. The situation is different now: the tax inspection enters the territory of a businessperson and easily takes money from the taxpayer. The inspection does not need a court order any more, which constitutes an infringement of the Georgian Constitution. No one has the right to enter the private property of a person without permission,” states Irakli Shavishvili, an expert in the field of economics.

Kakha Gvantseladze, head of Georgian Young Economists Association Kutaisi Organization thinks that “the court that we currently have is incapable of safeguarding the rights of a taxpayer. It would be wonderful if we had a system of private arbitrage, which would be a forum to adjudicate disputes between a businessperson and the state in an unbiased way. Kakha Bendukidze, former special minister, started talking about it once but the suggestion was not followed-up.  It is clear that now that this problem represents a serious defect under tax reform. However, one thing after the introduction of so-called tax reforms, it is now much easier for the government to control business and collect taxes.

 It is natural that our government does not want to establish a new body (private arbitrage) that would control relationships between a businessperson and the tax inspection, as this would not be in the interests of the government.

Gocha Badzgaradze, head of the Institute of Equality Kutaisi Branch-an NGO says that the facts of infringing the rights of taxpayers has become more frequent. He states that his organization is often visited by the victims of different kinds of harassment from the side of government representatives. “The rights of taxpayers, and do they actually exist? I do not have an answer for this question.

Every day several people come in our office and complain about this – there is no tax court and who is in the position to protect taxpayer rights? The rights of taxpayers are being violated, and this is the reality we face.  Nobody can be certain as how long this situation will continue,” states Gocha Badzgaradze.

The attorneys also talk about the violations of taxpayers’ rights. Esma Norakia, a member of the Georgian Lawyer’s Association explains, “it is not serious to talk about the development of business in Georgia.  The facts of infringements in this regard are at every step of the process.  The businesspersons do not waste their time in addressing the court system as they know this would just be a waste of time and energy.  One might say that the government reduced taxes, but who knows how much money the businesspersons spend on preserving their businesses. Hence, it will not be exaggerated when I say that in this country nobody is thinking about the protection of property and development of business.”

There is a famous expression- “give me a court and you will have that kind of tax collecting body that you want to have”. The experts think that the rights of a proprietor and a taxpayer are safeguarded only when Georgia is a free society. “It is very easy to elaborate the mechanism that will protect such inherent rights. Only people’s will and a court are required for the started objective.  When the project of present tax code was being worked out the private arbitrage that would adjudicate tax disputes was anticipated in it. The project was also saying that there would be a tax ombudsman. Unfortunately, the chapter about the tax ombudsman was taken out of the draft because the system of arbitrage remained. This means that the businesspersons were told: you do not need this tax ombudsman, as you still have access to arbitrage. However, after 3 months of Tax Code going into force, the arbitrage was abolished. For some reason nobody remembered this fact for some time. I think that the office of tax ombudsman can become a very important institution for Georgian business. However, we cannot rely only on this institution.  The way out of this situation is that the society must struggle with the government from every angle, as hard as possible. The society must always try to safeguard its rights,” says Irakli Shavishvili.

Though, Georgian society is much more free than it used to be 10-15 years ago it is still unable to protect various rights. Businessperson (taxpayer) would rather give in to the demands of the government then to raise their voices. Consequently, the business in Georgian faces real danger. Some the relatively major business organizations are now in the hands of governmental representatives. Some of them are the real owners of the organizations and some have both influence and direct control over them. It is not surprising that the only people who talk about the freedom of business in Georgia are the representatives of the government themselves. The taxpayers whose rights were violated prefer for various reasons keep silent and pay up.