Government Offers Tax Agreements to Major Companies, Preserves Fixed Taxes for Small Enterprisers

The Government of Georgia has decided to offer the Georgian business sector to conclude a deal. On December 15 the law on Tax Agreement was enacted. The law gives an opportunity to companies to enjoy certain preferences if they recognize state tax arrears.

The company or businessman, who will sign a tax agreement with the Government of Georgia, is obliged to unconditionally pay certain part of the tax liabilities, while the Georgian Finance Ministry will define the timetable for payment of the remaining portion of tax liabilities stage by stage. The audit, which will be carried out in the company following the recognition of the tax liabilities, will define the amount of the sum to be paid unconditionally. It is not ruled out that the Government write off certain portion of the tax liabilities from the company.

Moreover, the businessmen and companies, who are trying to cast light on their tax relations with Authorities running to the Boards of Appeals and courts, are also encouraged to enjoy the preferences. All companies, which have submitted appeals to the Finance Ministry Board of Appeals or the Revenues Office Board of Appeals, are entitled to withdraw from lawsuits and sign tax agreements.

Part of Georgian businessmen positively evaluates this new initiative of the Government, which has been already enacted. The conclusion of a tax agreement may occur more favorable than running to the Boards of Appeals and courts. It is famous that discussions of tax disagreements are continued for a long period and it is a protracted process. At the same time, there is another part of the companies, which finds this initiative of the Government of Georgia unacceptable and prefers to protect their rights in courts and the Boards of Appeals.

We should recall Kazbegi company, on which the Tax Inspection has imposed a fine of over 7m GEL. The company has no plans to sign a tax agreement. Kazbegi has submitted an appeal to the Revenues Office Board of Appeals. If the Revenues Office Board of Appeals does not satisfy Topadze’s claims, the plaintiff is authorized to bring an appeal to the second instance, that is, the Georgian Finance Ministry Board of Appeals. In case of repeated failure, Gogi Topadze, a Kazbegi President, expresses readiness to apply to the Georgian court system to prove his innocence. It is not ruled out that Kazbegi apply to the International Court too.

Under the legislature, a tax agreement is signed if the amount of unrecognized tax liabilities of a taxpayer exceeds 10 000 GEL (the figure equaled 100 000 GEL until December 2009).

One hundred companies have already submitted applications to the Revenues Office for conclusion of a tax agreement. Giorgi Tskhakaia, the head of the Georgian Finance Ministry Revenues Office, notes that the Ministry has signed tax agreements with only seven companies. At the same time, Tskhakaia shows restraint to name “the pardoned” companies for information privacy. Nevertheless, Tskhakaia has divulged that the total amount of the recognized tax liabilities of these seven companies makes up 10m GEL.

Coca-Cola Bottlers Georgian, Quartzite, Belux and Madneuli are among these seven companies, a reliable source told the Georgian Business Week (GBW) newspaper.

According to the source, Coca-Cola Bottlers Georgia has concluded a tax agreement on tax liabilities of 16m GEL, including 4m GEL must be paid unconditionally, while a timetable will be worked out for payment of the remaining tax liabilities of 12m GEL. The company asserts that the negotiations with the Georgian Finance Ministry on the conclusion a tax agreement have not ended yet and the mentioned sum does not correspond to the reality.

Madneuli also confirms the fact of conclusion of a tax agreement. Giorgi Devadzde, a Medneuli director general, says that the company has already completed negotiations with the Finance Ministry. At the same time, Devadze refrained from unveiling the agreed timetable and the amount of the recognized tax liabilities. Madneuli has no lawbreaking and only technical issues should be resolved, he sad.

“We are content with our agreement with the Finance Ministry. The tax agreement gives us an opportunity to tell our foreign partners how favorable investment climate and liberal legislature are in Georgia”, Devadze noted.

Quartzite, which is a subsidiary of Madneuli, has not made comments on the issue. The company has only noted that similar information represented a tax confidentiality.

Despite the fact the Authorities assert tax agreements have been concluded on only 10m GEL, experts cast doubt on these figures.

The question is of tens of millions of GEL, experts note.