Indepenent press may be taxed out of existence

The clauses in the new tax code obliging the press to pay additional tax, discussed by the Parliament of Georgia on June 17, have created great discontent among print media representatives. The new tax code does not define the product code for newspapers, while codes are given for all similar items, while there are only verbal indications that the print media will still not have to pay VAT for printing and distributing their newspapers and on advertising revenue.

Press representatives say that these clauses indicate that the Government of Georgia wants to punish the independent print media through acts of "legistalive hooliganism". Lasha Tugushi, Editor-in-Chief of Rezonansi and the Chair of Georgian Press Association, spoke of the gaps in the new tax code at a special discussion organised by the Open Society Georgia Foundation at Tbilisi Mariott Hotel on June 18. “The Government used to say that the new code was designed to simplify the tax system. So what has the press done wrong I wonder, or was this a political decision?” Tugushi asked Irakli Siradze, the Deputy Minister of Finance. Siradze said that unfortunately he couldn’t remember the clauses being referred to but promised to look into this. “I can’t claim to know every word of this 308-page document by heart. There have been changes made around the VAT issue but I wouldn’t have been ashamed to say if such a decision had been made concerning the print media. The published version of the code is a working draft and any inaccuracies will be corrected in the final version,” Siradze said, doubting whether there was any technical problem with the document. He stressed that special product codes are segmented into groups in the latest draft.

The existing tax code specifically frees books, newspapers and magazines from paying VAT even on advertising revenue while this is only mentioned in passing in the new code. Gia Khuroshvili, Secretary of the Parliament of Georgia, denies that additional financial obligations have been imposed on the print media. However Lasha Tugushi said that “If they had drafted a law abolishing the print media everything would have been clearer,” worrying that if the draft tax code remains unchanged editorial offices will be permanently closed from 2011 due to tax pressures.

The “revolutionary” new tax code will come into force from 2011. The Government says that the new code will increase trust in the tax system, encourage business development, eradicate obscurities and bring Georgia into line with European requirements. The Ministry of Finance claims that 98% of the existing code has been changed but experts suggest that the “kind” reasons given for the changes merely disguise the negative aspects of them.

Irakli Shavishvili from I&N Audit has made a professional analysis of the draft code and stressed that the "98% changes" refers merely to changes in the numeration of each clause, not their content. He said that the tax bodies will retain their main role and have greater rights than the customer. “The customer will have to submit to sanctions but the state is not held responsible for the non-fulfilment of its duties and the tax bodies are entitled to demand cash in return for discharging their liabilities,” Shavishvili said, stressing that this is all against the constitution as these clauses decrease the rights of local government institutions, which have the constitutional authority to decide the rates of taxation on property in their areas. Shavishvili stressed that there are lots of ambiguous clauses in the new code and encouraged the Government of Georgia to avoid making further changes and fill the gaps in the code as soon as possible. Irakli Pertaia, Advisor on Business Issues to Prime Minister Nika Gilauri, said that the relevant Government group is still discussing the tax code and there is still time to alter it.

“I attended the discussions on the new tax code on Friday and felt that the draft was clearly an attack on the freedom of the media,” Eliso Chapidze, Deputy Editor of Rezonansi told The Messenger, stressing that the VAT charges mentioned in the new code have never been suggested in the whole history of independent Georgia. “This new code will make the print media disappear because there are hardly any newspapers or magazines which can pay these charges. 80% of TV stations here are controlled by the Government of Georgia but the press is free in expression and can publish critical opinions,” Chapidze said, stressing that if the staff of Rezonansi hadn't found the offending clauses in the draft Parliament would have adopted it without opposition.

Chapidze said that although Kakha Baindurashvili, the Minister of Finance, explained the proposed changes as a technical error, Irakli Siradze, the Deputy Finance Minister who co-authored these changes, hadn’t given his personal opinion on this issue. “The error may really have been caused by some technical problems but Siradze could have stated his own position on this,” she said, adding that media representatives will keep their eyes on the situation. She said that she hoped everyone connected with the press would express their protest about the possible imposition of VAT charges on newspapers.

The Messenger also expresses its concern at the possible imposition of extra taxes on the printed media and understands this proposal as an attempt to pressurise the media into taking a more pro-Government line. The Messenger also asks all its readers, in particular representatives of the diplomatic corps, and international media organisations to try and ensure freedom of the press and democracy in Georgia.