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“The Rights of Taxpayers in Georgia are Increasing,” AmCham Commercial Law and Tax Committee

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The FINANCIAL — The American Chamber of Commerce in Georgia has re-launched the Commercial Law and Tax Committee, set up to analyze developments in the area of commercial law and tax, and identify ways in which the law and its implementation can be improved.

 

“USAID has allocated about 15 million USD for the Judicial Independence and Legal Empowerment Project,” Ted Jonas, co-chair of the Commercial Law and Tax Committee, told The FINANCIAL. “The main idea of the Project is to improve legal education and judicial independence in the country. USAID gave this money as a grant to the EastWest Institute which gives out sub grants. We got a sub grant through the Eurasia Partnership Foundation. Our grant amounts to 75,000 USD.”

Q. How and why was the Commercial Law and Tax Committee created?

A. We are focused on issues that are important for the business community. In our proposal we said that we will use the structure of Amcham, which is a business association. The organization already had committees of agriculture, transport, telecommunication etc. We had a tax committee in the past and revised it, combining it with legal issues. Our main role is to look at parts of tax and commercial law that are problematic for business.

We invited members of AmCham to join our committee if interested in working in detail on tax and commercial law issues that are proving problematic nowadays. We particularly appealed to the tax, law and auditory firm members of AmCham. Almost all of them joined the committee, and some other members also joined us. For example, Mobypay, which is a mobile service company.

The grant given by Eurasia Partnership Foundation was mainly for the committee staff. The committee members can’t do very detailed work however. The representatives from law and accounting firms and business people have their own jobs to do, and can’t spend all their time on the committee’s work. Therefore we have our own staff. One of them is Gigi Liluashvili, also a member of AmCham. He is a very good lawyer and essential for us. Another of our staff members is Nino Bakakuri, former Tbilisi court judge and Columbia law school graduate. She is a very well-qualified Georgian lawyer with US education and several years experience as a Georgian judge. Nino is perfect for the project.

Q. What are the main activities and duties of the Committee?

A. We look at any particular cases of judication of tax disputes by administrative decision bodies like the Ministry of Finance; legal cases with particularly bad decisions and particularly unfair processes. The basic part of our mandate is looking at tax and commercial laws that for whatever reason don’t work properly or are problematic.

We identify commercial law, provision of tax code and practices of tax officials which are proving difficult and challenging for businesses. We have actually found many such cases, but we’ll only focus on a few of them. The Committee will work by studying those issues and then deciding what to do. We might send some case studies to government officials including the Prime Minister and say – “look, this law is a big problem and needs to be amended”. We will try to engage them in dialogue. The Committee won’t create negative publicity. We are trying to work in a constructive, subtle way with the Government to improve legislation and avoid bad legislation.

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We publish some articles about our activities; what we are doing in general. In some cases we may be more specific. For example, if the Government is not responsive, if we are making good suggestions and they are not paying attention to them, then we might be more public about the issue.

At the end of the process we will produce a report for our funders. It will be a report about problems which we have identified in the law. The whole purpose of the Committee is to improve the body of business and tax law, and through this create a good business climate in the country. We want to implement more Western, European and American style legal systems.

Q. How long will the project last for?

The funding from EPF is a one year grant. We are supposed to accomplish all our work as a committee in one year. I do hope though that a legal and commercial law committee with AmCham will continue operating after the year is over. If we don’t have funding after a year, we may have no staff, but the committee will keep functioning. In general our project is a long-term one.

Q. You identify problematic cases in the law. What would you say is the main problem of Georgia’s commercial law and tax systems?

A. I can’t say what the main problem is yet as we are still in the process of identifying them; there are some problems in tax code, commercial law, implementation and interpretation. Some court cases aren’t fairly judicated. Those are very general issues, but at the moment I can’t tell you more specific problems as we haven’t yet decided what they are.

Q. How do you estimate the Government and private sector’s participation in the process of commercial law and tax systems improvement?

A. They have absolutely equal roles. Both sides are indispensable. The Government is a legislation authority. We as a business can’t change the law. This is the Government’s function. At the same time there are not many business experts in the Government. This is not unique to Georgia. This is typical. They need to get information about business, understand the impact of the law on business. They can’t make good legislation without us and we can’t change the law without them.

Q. Despite the problems, do you think that the general situation is improving?

A. There are clear improvements, especially in the tax code. But it mainly depends on which periods we compare. If we look back to 2004 and then look at today, there have been enormous improvements in tax including the simplification of procedures like registering a company. Government services especially in the legal and tax sector are much better today than they used to be. They are more service oriented.

We now have a low level of corruption. This is a huge improvement for the majority of society. The rights of taxpayers are increasing. All these processes are going in the right direction.

But still the court’s decisions aren’t always clear and sometimes the results are not right. This remains the biggest problem. These processes have to become more transparent.

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Q. From your point of view how much time is needed to improve the general situation and reach a satisfactory result?

A. This is a general process. It is not always improvement. I’m an American and from my point of view there are many aspects in the US tax and business regulatory framework that are worse today than they were twelve years ago. This is from my perspective. It’s a constantly developing process and I think it’s absolutely unique for each country. Therefore I can’t make any definite predictions. The point is to continue to develop all the time.

Q. You are a Managing Partner of DLA Piper. Please could you tell us about the firm?

A. This is the biggest law firm in the world in terms of revenue. It has 4,200 lawyers all over the world. DLA Piper was created in 2005 by the merger of DLA, Piper Rudnick and Gray Cary, followed by aggressive growth in the CIS, Germany, Spain, Asia, the Middle East and important US markets, among others. A few months after the merger they decided to expand the chain in former Soviet Union countries.

We opened a DLA Piper office in Tbilisi in July 2005, but the firm itself actually goes back to 1994. At that time we founded the Georgian Consulting Group, which in 2005 became DLA Piper.

Q. What is the share of local and foreign customers at your firm?

A. Today it is probably half and half. This is remarkable because before becoming DLA Piper about 90 percent of our customers used to be foreigners. The reason is that this is the first big international law firm in Georgia. Local companies were relieved that at last they have an international law firm in Tbilisi, with offices in London, Amsterdam, NY etc, and therefore decided to become our clients.

Q. Which sectors are your main clients from?

A. Our clients are from the sectors which are currently the main sectors in Georgia. These include banking, transport, energy etc. The top four banks TBC Bank, Bank of Georgia, VTB and Bank Republic are our clients.

We have some smaller clients as well. For example, Avon is our significant client globally.

Q. How affordable is your service for small and medium size businesses?

A. For medium size businesses, we are affordable. We definitely have some medium size Georgian and foreign clients. As for small businesses, they are not our clients. It isn’t because the prices are too high. It is more because of the way we do things. Small businesses with small legal issues don’t have so many troubles and can usually solve them themselves. We are set up to do more detailed work. Medium size clients use us because they trust our quality. They have quite a lot of pressure on them to look for simple and cheaper solutions.

In general Georgia is a very cheap country in terms of law consulting. The service is cheaper here compared to in Ukraine and some other nearby countries.

 

 

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