GEO

Tax amnesty for TV stations – new data highlights financing scheme for pro-government media

11 February, 2013

The Ministry of Finance recently released data about a tax amnesty for Imedi, Rustavi 2 and PIK. The three TV channels, affiliated with the government at the time, had a tax debt of GEL 20 million written off after the October 1 parliamentary elections. The decrees to forgive the companies unpaid taxes were signed by the outgoing Prime Minister, Vano Merabishvili. Details about the tax amnesty, provided to media.ge, show the extent to which the United National Movement subsidized TV stations which it controlled through loyal frontmen with public funds.

In exchange for supportive reporting, the government allowed loyal media outlets to not pay taxes over several years, creating a somewhat sophisticated model of hidden public subsidies. In the years 2009 to 2012, when the Revenue Service strictly enforced tax collection and at times coerced companies into overpaying taxes to avoid trouble, the non-payment of taxes for only a few months would have resulted in criminal charges being brought against the management of any independent, prominent company in Georgia. In 2010, Parliament passed a first tax amnesty over GEL 36 million for TV stations.

The tax amnesty granted to pro-government TV stations raises questions about a possible abuse of power by the people who protected these entities from the application of the tax code. The repeated tax amnesties and the selective application of the tax code also contributed to a non-competitive market environment, resulting in higher operation costs for critical TV stations which had to pay their taxes to avoid being shut down and thus didn’t benefit from the amnesty. 

During its time in government, the United National Movement granted two tax amnesties to TV stations, forgiving a total of GEL 55.2 million in debt. Of this sum, GEL 42.2 million in debt was forgiven to private companies operating channels supportive of the government, GEL 12.3 million was forgiven to the Georgian Public Broadcaster, and GEL 691,559 were forgiven to local stations based in Gori and Batumi – Trialeti TV and Channel 25 – which were generally critical of the government. 

TV station

Forgiven tax debt 2010 (GEL)

Forgiven tax debt 2012 (GEL)

Forgiven tax debt total (GEL)

Georgian Public Broadcaster

12,311,959

-

12,311,959

PIK

-

1,496,971

1,496,971

Imedi TV

1,553,161

13,565,962

15,119,123

Rustavi 2

20,140,581

4,843,107

24,983,688

Mze (linked with Rustavi 2)

593,159

-

593,159

TV 25 (Batumi)

643,687

-

643,687

Trialeti (Gori)

47,871

-

47,871

Total

35,290,420

19,906,040

55,196,460

 

Rustavi 2, the country’s largest television outlet, had GEL 4.84 million of tax debt shaved off its books, by two decrees of Prime Minister Merabishvili, dated 20 August (decree #1199) and 12 October 2012 (decree #1445), leaving only GEL 400,000 of tax liabilities. Rustavi 2 reported revenues of GEL 39.3 million in 2011 and GEL 20.3 million in the first nine months of 2012, according to GNCC data provided to TI Georgia. 

Other Prime Ministerial decrees  benefitted Imedi TV (20 August 2012, decree #1200 and 12 October 2012, decree #1447) cutting the station’s tax debt from GEL 13,865,962 to GEL 300,000.  Four days after the debt was written off, the TV channel was returned to the family of the late oligarch and opposition politician Badri Patarkatsishvili, whose TV channel the government raided and shut down in 2007, and then brought back on air under its control in 2008. In the first nine months of 2012, Imedi reported GEL 18.8 million in revenues, after annual revenues of GEL 28.1 in 2011. 

The outgoing Prime Minister Merabishvili also issued a decree cutting unpaid taxes of PIK, which operated the Georgian Public Broadcaster’s Russian language news channel in 2012 under a GEL 14 million contract, from GEL 1,501,971 to GEL 5,000. In November, the agreement between PIK and the GPB was cancelled, the channel shut down and up to 400 employees were dismissed. PIK LLC changed ownership and was taken over by Darius Jurgelevicius, a Lithuanian who, according to media reports, has in the past served as an adviser to Merabishvili. 

 

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Author: TI Georgia
Media, TV, tax amnesty