Concept of Taxation: What is Taxation?
The tax code defines taxes not as an in equivalent and uncompensated transfer of sums to the State but as a liability of certain persons before the State so as this last can provide its citizens and all legal residents on the territory of Georgia with safe life and work environment. Thus, this new definition defines the taxes as a reciprocal liability of the State and a tax-bearer before each other. Such definition makes it clear to the tax-bearer that the taxes are not some tribute but a sum payable by a tax-payer to the state administration on legal grounds, which by force of law must be used for his own interests.
Repeal of sub-laws (instructions) in taxation. Draft Code itself contains detailed directives concerning calculation of tax rates and samples of the accounting forms (declarations). Therefore, it does not envisage working out and publication of guidelines relating to taxation. Such approach is accounted both by international practice (forbidding specification of taxation procedures by standard acts ranking lower than Law) and own experience which proves that very often instructions instead of clarifying the rule of law make it even more incomprehensible). Moreover, there are frequent cases when definition given by an instruction is absolutely contradicting the same rule of law it defines. Another significant ground in favor of rebuffing instructions is that they are not universal. As a rule, instructions are not easily available for most of taxpayers whereas, provided they are available an administrative officer is fully guided by these instructive norms even when these instructive norms are in contrast with the corresponding norms of the Code. Apart from the fact that this places a taxpayer and an administrative officer in unequal positions, it is also distorting legal understanding of administrative officers and hampers their professional growth.
Sharp reduction of the number of existing payments. Currently, there are 12 national and 6 local taxes imposed by the valid Tax Code. According to the draft Code the number of national taxes shall be limited to 3 and that of the local taxes - to just one type.
The draft Tax Code is based on the following principles:
1. Tax bearers and public administration shall regulate taxation-related issues on parity terms;
2. Each payment should be based on a clearly fixed concept. It should have a clearly expressed purpose and intention;
3. Payment and rules of tax administration shall not abuse principle human rights, such as economic and social rights. The weight of an averaged tax burden should be reasonable and bearable to the tax-payer and should not exceed 30 per cent against the GDP;
4. Introduction of taxes should be economically reasonable with predictable and justifiable long-term outcomes. Introduction of taxes with the aim of attaining some short-term fiscal or other local effects is inadmissible if in the medium and long-run this may turn into the factor impeding economic growth;
5. It is unjustified to introduce taxes unless this entails a reasonable fiscal effect;
6. Taxes should not breach liabilities undertaken under the international agreements;
7. Maximum harmonization of the tax code with the current Georgian legislation and in the first turn with the Constitution, Civil and General Administration Code. Norms and terminology of the Fiscal Law should to the highest possible extent be brought into conformity with the norms and concepts established by the active legislation;
8. Special terms of the Tax Code should be based on concepts specified by the accounting and auditing standards;
9. Introduction of taxes is unjustified if the possibility of their administration is doubtful and the anticipated effect is not subject to prognosis. The tax administration regime should be transparent and should to the highest possible extent exclude any possibilities for corruptive actions.
10. Authorities of tax administration should be balanced by corresponding responsibility. Delegation of powers to the administration unless they are balanced by responsibility and subject to control is inapplicable as otherwise such powers are as a rule abused;
11. The competence of tax administration as a body responsible for the fulfillment of the plan should be extended to that of the body supervising law observance. Establishment of efficient control mechanisms for the execution of the Fiscal Law and their sustainable functioning should be made a principal criterion for the assessment of the work of tax administration officers. Motivation of the work of tax administration officers instead of the fulfillment of the plan should be related to the law enforcement and establishment of an atmosphere of supremacy of law and effective management in the system.
12. Payment must be stable allowing for long-term planning on the part of a tax-bearer. Procedure of introducing changes into Fiscal Law should be subject to strict regulation. The changes adopted may be put into force only since the beginning of a new fiscal year.
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