Reforms at Georgia Revenue Service

Batumi, Georgia

22-24 September, 2011

Summary

• Reforms in Tax and Customs Spheres

• Electronic Tax Administration

• E-Customs

• Georgian Business Sector’s expectations after Rose Revolution:

– Removing a daily threat of corruption

– Creating a legal system that was predictable rather than arbitrary

– Ensuring free, open and competitive economy

• Reforming Georgia into the easiest and the most attractive

place for doing business

Reforms in Tax and Customs Spheres

Institutional Reforms

2007

Customs Administr

ation Tax

Administration

Revenue Service

Tax

Tax Prevention Department

Audit Department

Service Department

Customs

Economic Border Protection

Department

Customs Clearance Department

Mediation and Dispute Resolution Department

International Relations

Department

Legal Department

Administrative Department

IT Department

PR and Marketing

Department

HR Department

Since January 2011 – New and unified Tax and Customs Code

Business Climate: Low and Competitive Taxes • From 26 types of taxes in 2003 - to only 6 types of taxes in 2004

• Income Tax - 20% (by 2014 - 15%)

• Corporate Tax – 15%

• VAT - 18%

• Property Tax - 1%

• Import Tax - 0%; 5%; 12%

• Excise Tax (differential)

• State revenues increased by 80% in 2005‐2007

Fair, Simple and Reliable Tax System • Personal Tax Agent

• Advance Ruling

• Tax Agreement

• Special Tax Regimes – Micro and Small

Businesses

• Good Faith Principle and Tax Ombudsman

• RS Commission for Production Loses

• Risk Based Audits

Alternative Audit

Revenue Service

Alternative Tax Audit

High

Risk Companies

Medium Risk Companies

Low Risk Companies

Revenue Service

Out of 1200 complaints in 2011

Decision January February March April August

Refused 70% 75% 67% 65% 15%

Partially decided in favor of a company

18% 18% 23% 22% 10%

Fully decided in favor of a company

11% 8% 10% 13% 75%

Trend 29% 26% 33% 35% 80%

Mediation vs. Dispute Resolution

District Tax Officer - from Control to Partnership

Bringing services to taxpayers Advising, informing and educating taxpayers

Customs Reforms Tariffs

Before 2007

(16)

12% 14% 15%

16% 17% 18%

20% 25% 30%

5% 6% 7%

8% 10%

4% 0%

After 2007

12%

5%

0%

Customs Reforms Tariffs

• Before 2005

import procedures

required:

• After 2009 import

procedures

require:

54 documents 4 documents

Customs Reforms

Customs Reforms • Special VAT Regime

• Golden List

• Certificate of origin

• Unified customs and revenue taxpayer files

• Creation of Customs Clearance Zones in Tbilisi, Batumi, and Poti

Electronic Tax Administration

Taxpayer brings filled tax returns to tax office or sends it via insured post

For submission of

tax returns tax

payer was

enforced to wait in long queues

Tax inspector receives and certifies tax returns submission fact

Submitted tax

return is

transmitted to the

information

processing division

Tax return

data

manually

put in joint database

Processed

returns are

transmitted

to the Archive

Data from

submitted

declaration is

reflected to the

personal card of tax payers

Correction of

mistakes in tax

returns causes

delayed

calculation of tax liability

Tax Returns Filing before 2009

Electronic Filing after September ’09 Tax payer fills and

sends electronic

tax return via internet

Electronic tax return is assigned the

reference number

Tax returns are electronically archived

Electronic registration

Applications

Integrated Tariff Data protection

Internet payments

SMS & E-mail

Accelerated services

Business Environment

Video Tax Code

Electronic filing

Electronic VAT Invoices

Collection of Payments

Appeals

Customs Clearance Zones

Frequently Asked Questions

Notifications Tax Free

Postal Parcels Declarations

Mortgage/Arrest of Property

Business Map

Only 2% of Time

• According to the Enterprise Surveys Georgia ranks #1 in Eastern Europe and Central Asia

RESULTS: Minimize corruption risks Ensure full performance monitoring

WWW.RS.GE

USER

RS Manager

Map Layers

Statistics

Marked area 1500 km2

Population on the marked area 543

Number of taxpayers 17

Bread production 4

Clothes shops 5 Construction business 1 Hotels 2

Restaurants 4

Financial serivces 1

Businesses on the marked area

Report 26.11.2010

Implemented measures - Details 36

Control purchases - Details 16

Chronometric checks -Details 3

Stock-takings/Inventories - Details 2

Penalties -Details 5

Sealings - Details 1

Examinations - Details 7

Audit procedures - Details 2

New Approach

Registering Financial Means

Tax Receipt with bar code

Customer Collecting Terminal

Server

Crypto Module

Network

GSM

E-Customs

Red channel (Physical inspection)

Yellow channel (Documentary check)

Green Channel

(No prerelease check)

Blue Channel (post clearance audit)

’’ASYCUDA” Automated System of Customs Data

Risk Criteria Random Selection Module

ASYCUDA World

Risk Distribution

35%

5%

42%

18%

Import

10%

1%

56%

31%

Export

TRACKER 7

MINISTRY OF DEFENCE

MINISTRY OF ECONOMY AND

SUSTAINABLE DEVELOPMENT

MINISTRY OF ENVIROMENT

AND PROTECTION OF

NATURAL RESOURCES

SERVICE AGENCY

OF THE MINISTRY OF

INTERNAL AFFAIRS

DATA SERVER

License/

Permit

REVENUE SERVICE

Simplification of Procedures Single Window

E-Customs

Ministry of

Internal Affairs Ministry

of Defense

Ministry of

Health

Ministry of

Justice

Airlines

Railway

Bonded Wareho

uses

Customs Brokers

Before Creation of Customs Clearance Zones

Border Crossing

Point

15 – 30

minutes

Warehouse

1 -2

hour

Bank for

Payment

30 minutes

–

hour

Broker

For

Declaration

45 minutes

-

hour

Clearance

Service Center

10-30

minutes

Examination

(in case of red

corridor)

2 – 3

days

Warehouse

(in case of red

corridor)

30 minutes

Clearance Service Center

10-30

minutes

Warehouse

30 minutes

Release of goods

After Creation Customs Clearance Zones

Border Crossing Points

In case of standard procedures – in average 15 minutes

In case of red corridor – average 45 minutes

In case of green corridor - average 5 minutes (passport data registration control and customs procedures)

Advance Declaration Case

Customs

Clearance Zones

In case of standard procedures – in average 15 minutes

In case of red corridor - up to 1 hour

Payment of Customs Clearance Fees and Import

Duties are postponed by 5 days

Why Customs Clearance Zones? Clearing goods from office via www.rs.ge

Reduces paper-related costs

Advanced review and preparation of documents

Translation of Invoices

Collaborates securely with geographically dispersed clients

Filling & Processing:

- Land, Air, Sea and Railway declarations

- 750 declarations a day (on average)

Working hours: 24/7

Clearance Time: 15 minutes in average

Transportation of goods to the place of destination

Time line for documentary checks Ti

me

Past

100 % control

“Blind Control”

No risk analysis or assessment

8 Different agencies on the border

Today

Relevant Access to the database of

1) Patrol Police

2) House of Justice

Risk management system

Risk profiles

Random selection

Tomorrow

Joint use of BCPs

Turkey

Sarpi BCP in place

Armenia Negotiation process

Azerbaijan Proposal feed-back

Ukraine Interexchange of advance

information/agreement is signed

•National Agency of Public

Registry

•Civil Registry •Notary Chamber of

Georgia

Reforms are never enough . . .

Reforms go on . . .

www.rs.ge