The article looks into the phases of reforming the tax system of Georgia in term of its liberalization. Since the early 2000s, the tax system of Georgia has undergone a significant transformation. There were reduced both the number of taxes and tax rates. Anti-corruption measures were taken, the legal framework was improved, and tax services were changed over to e-services. Tax administration was considerably simplified, but also at the same time was strengthened. The level of fiscal discipline was increased. As a result, despite the seeming release of tax pressure, tax revenues for the treasury were increased manifold.
It is clear that success of tax liberalization at this stage of the reform was largely due to the reform of the tax administration system. Higher fines were imposed for violators of tax discipline, which was reflected in severe tightening of tax administration due to the disruption of the corruption environment. A positive link was confirmed between tax liberalization measures and streamlining of the tax administration system in terms of successful tax reform.
A number of innovations have been introduced, including: simplified and mostly electronic-automated service procedures, special tax statuses for small and micro entrepreneurs, the so-called "Estonian" model of the taxation of enterprises, the possibility of concluding a tax agreement, a warning mechanism as an alternative to monetary penalties, and so on.
It should be noted that over the years, measures to relief, forgive or partially reduce tax debts accumulated in previous periods have become an accompanying and distinctive attribute of the significant ongoing reforms in the tax system. This process has become particularly large-scale since 2015. Just in 2015-2019, more than 68 billion taxpayers owed more than 3.5 billion GEL in terms of both basic taxes and fines.
We believe that the unambiguously positive assessment of these large-scale measures for debt relief would not be correct. Of course, such measures relieve the tax administration system of the burden of recovering uncollectible debts. The International Monetary Fund and other donor organizations also require and welcome this.
The advantages of this process, as well as related risks and possible threats are being discussed. It is noted that consistent use of such mechanisms leads to long-term negative fiscal consequences, as it undermines tax morality of taxpayers and prevents the introduction of a culture of tax compliance.
The tax amnesties, especially if they are recurrent, encourage an anti-competitive environment and generate a sense of unfairness among conscious taxpayers. Destructive expectations are created, which leads to the transformation of the taxpayer behavior model in the wrong direction. These trends are evident in the case of Georgia according to statistical data.
We believe that the final result of the tax reforms will depend to a great degree on the ability of the tax administration system and the state in general to prevent the possibility of the new tax amnesties in the future. It is necessary to create the preventive mechanisms that largely exclude possible recurrences of both debt relief of taxable objects and the accumulation of unpaid amounts of taxes.
Modernisasi Administraasi Perpajakan dalam Rangka Optimalisasi Pelayanan Pajak Berbasis Digital
