GEO

New Tax Ombudsman may face conflict of interest

03 February, 2011

This post was updated on: February 7 The new Georgian tax code, in force since January 1st, established the position of Tax Ombudsman. Last week the Prime Minister announced that George Pertaia will hold the new position. Pertaia has served as Senior Advisor to the Prime Minister on the private sector since May 2010 and will now hold the ombudsman position as well. However, if the responsibility of the new ombudsman is to uphold the interests of businesses against the state, this dual appointment may put Pertaia in an impossible position, in which he is simultaneously responsible for two different points of view. According to the new tax code, the duties of the new Tax Ombudsman include: submitting an annual report on tax payers’ rights to the Parliamentary Committee for Finance and Budget; responding to businesses that have tax disputes with the authorities caused by ambiguities in the tax code; and forwarding complaints to a special council in the Ministry of Finance that judges tax disputes. According to Pertaia, this council consists of executives of several well-known audit companies including Ernst and Young and it will meet once a week to evaluate complaints. Pertaia also says that his direct access to the Prime Minister will enable him to find appropriate solutions more quickly. As an Advisor to the Prime Minister Pertaia is responsible for fostering relations between the government and businesses as well as bringing Business’ problems to the government's attention. For all these responsibilities, Pertaia has only three people on staff. More importantly, this close relationship with the government might be an impediment to upholding the interests of the business community, as Pertaia’s physical location in the state chancellery could be a deterrent to entrepreneurs facing real obstacles from the state. The appointment of a Tax Ombudsman demonstrates the government’s commitment to protecting businesses and citizens. However, the degree of independence of the Tax Ombudsman still remains to be established. In our opinion, the following changes would help to demonstrate the good intentions: ● Separate the position of Tax Ombudsman from Advisor to the Prime Minister on private sector issues, or any other positions that may post a conflict of interest. ● Locate the office of the Tax Ombudsman in a building that is physically separate from structures that may present a conflict of interest, such as the State Chancellery. ● Ensure that the annual report to parliament is publicly available. Furthermore, in the first 12 months of the new tax code, more frequent reporting on issues faced by businesses would help to identify areas that need amendment or clarification. Regular, formalized and publicly available reporting will also increase the transparency of this new institution. Update: Monday, February 7 Giorgi Pertaia, the newly appointed Tax Ombudsman, told us that he resigned from his post as Chief Advisor to the Prime Minister the day received his new appointment. Furthermore, Mr. Pertaia informed us that his office will no longer be located at the State Chancellery and that there will be changes in the size of his staff.

Author: Eka Gigauri