Parliament To Ensure That Deferral Of Tax Payment For Individual Taxpayers Is Not Used For Discriminatory Or Electoral Purposes

On 4 May 2020, the Government of Georgia, within the scope of the draft anti-crisis plan, submitted to the Parliament of Georgia the draft amendments №07-2/469/9 to the Tax Code of Georgia. The bill consists of three parts and provides for a deferral of tax payment in two cases and tax relief in one case. The tax allowance and VAT deferral scheme offer certain clarity, whereas the part of the bill which authorizes the Minister of Finance and the head of Revenue Service to postpone the payment of income and property taxes for individual taxpayers for up to six months without defining certain criteria to public officials allows for the possibility of using a selective approach to taxpayers.

Granting broad discretionary powers to the Minister of Finance and the Head of the Revenue Service does not envisage a specific scope, it is of an absolute nature, the differentiation of which does not meet any criteria and allows for a discriminatory use, as well as includes corruption risks. The discriminatory approach may have a negative impact on the run-up to the 2020 parliamentary elections, resulting in a detrimental electoral influence.

The Constitutional Court of Georgia noted in the case of “JSC  Telenet v. Parliament of Georgia" that granting the administrative body certain freedom of action is often of great importance for ensuring effective governance, however, this shall not mean that the administrative authority should automatically become eligible to unregulated, unjustifiably broad and absolute discretionary powers.

The Constitutional Court reiterated in the same ruling that challenging the decisions taken by the administrative body and determining liability thereof is associated with much greater difficulty when the agency operates under conditions of freedom of action. Therefore, the administrative discretion, along with its positive aspects, is always accompanied by the increased risk of power abuse and it should be always necessary to delegate the discretionary authority to an administrative agency under strictly defined criteria, terms and conditions that would place the authority vested in the legal framework and secure a fair balance between the risk of abuse of discretionary power and its goals. Moreover, it will guarantee the foreseeability of the grounds of the discretion and prerequisites for any entity operating under the supervision of the administrative body.

The draft law under consideration gives the administrative body (in this case the Minister of Finance of Georgia and/or the Head of the Revenue Service) the discretionary power to postpone the payment of taxes for certain taxpayers without any basic criteria.

Besides, given that the law does not provide specific criteria on the basis of which taxpayers will be differentiated and their taxes deferred, delegating the power to two entities may lead to highly non-homogeneous practice towards taxpayers. The initiator of the bill is obliged to explain to the public the purpose of designating the head of the Revenue Service as a decision-maker.

We call on the Parliament of Georgia:

• To define in the law the terms for taxpayers who will be eligible to the deferral of income and/or property tax payments;

• The initiator of the bill should explain on what grounds he/she intends to equip not only the Minister of Finance but also the Head of the Revenue Service with the above powers, based on which the Parliament will be able to make a decision on granting the authority to the Head of the Revenue Service.