On September 19, the Ministry of Finance responded [1] to a statement [2] by Transparency International (TI) Georgia regarding the Government's legislative initiative currently being discussed in the Parliament. According to the draft law, tax authorities can access a person's confidential information from banks for evidence in a legal case without the knowledge of the individual, or their being party to the court case.  

In our opinion, the statement by the Ministry of Finance contains a number of incorrect notions, which is why we submit additional comments on the matter.   

1. Our conclusion that the draft law does not specify the procedural rights of parties.

Ministry of Finance: According to the Ministry of Finance, TI Georgia’s statement that the draft law does not specify the procedural rights of parties is incorrect. The Ministry refers to international agreements and international standards when justifying the tax authority’s right to obtain a person’s confidential information without the person’s knowledge. The Ministry’s letter states that "an authorized representative of the Revenue Service must have the right to obtain required information from any private entity or organization, including from banks and financial institutions, in order to fulfill the tax information exchange obligation stipulated by an international agreement based on a partner state’s request”.

TI Georgia’s response: The criticism by TI Georgia does not apply to the issue of whether or not information should be exchanged between countries within the framework of an international agreement. The problem lies in the way the tax authority obtains this information. The obligation of unrestricted acquisition of information does not exclude the right of a person to be informed, to participate in the relevant court case and to have the right to appeal its decision. Important to note is the fact that international agreements do not have legal superiority over the Constitution of Georgia, which states that a person’s privacy can be restricted "to the extent and insofar as is necessary in a democratic society [3]". Neither tax administration nor a request from a foreign state are among these exceptions. This provision of the draft law violates both the Constitution and the right to protection and a fair trial guaranteed by the European Convention on Human Rights.

2. Our conclusion that the draft law jeopardizes a person's right to privacy and protection of personal data.

Ministry of Finance: According to the Ministry of Finance, since the tax authority does not transmit the obtained information to a third party, the ministry does not understand why TI Georgia still considers this provision of the draft law as a threat to the right to privacy and protection of personal data.

TI Georgia’s response: We assert that while a  transfer of information to a third party would constitute a violation of the right to privacy, it is violated to a higher degree in cases when the state interferes with this right without legitimate purposes.

3. Our conclusion that the tax authority is given unlimited discretion in the process of obtaining confidential information.

Ministry of Finance: According to the Ministry of Finance, the tax authority obtains confidential information based on "administration purposes" prescribed by law. The Ministry is confused by TI Georgia’s conclusion — that the tax authority is being given unlimited discretion in the process of obtaining confidential information and is not required to specify the reasons why it requires the requested information — and considers it “unclear and incorrect”.

TI Georgia’s response: Our criticism concerns the procedure by which the tax authority applies to the court for a warrant. In particular, the tax authority needs to include in its application a specific purpose for which it requires the confidential information, and what specific risks will the information help prevent. An administrative purpose is a very broad concept that requires specification and definition for each and every individual case.

We welcome the fact that a similar criticism was accepted by a representative of the Ministry of Finance during a presentation of the draft law at the Parliament’s Legal Issues Committee. The Ministry representative promised that this flaw would be corrected in the draft law.