Wednesday, 08 March 2006

MERCHANTS VS. GOVERNMENT: CASH REGISTER CONTROVERSY IN GEORGIA

Published in Field Reports

By Kakha Jibladze (3/8/2006 issue of the CACI Analyst)

According to the law, all merchants – with the exception of street vendors selling nuts and barber shops – were required to start using a government-approved cash register by March 1 or face serious fines. Shop owners and vendors hit the street in surprising numbers with protests in Tbilisi, reaching an estimated 1,000 people once word of the law and its implications became widespread. Protests were also reported in Batumi, Gori and the Kakheti region.
According to the law, all merchants – with the exception of street vendors selling nuts and barber shops – were required to start using a government-approved cash register by March 1 or face serious fines. Shop owners and vendors hit the street in surprising numbers with protests in Tbilisi, reaching an estimated 1,000 people once word of the law and its implications became widespread. Protests were also reported in Batumi, Gori and the Kakheti region.

While leaders of the political opposition have been riding the wave of discontent, the government has held strong on the issue. On March 1 even the President weighed in on the conflict, stating that taxes must be paid and cash registers belong in the outdoor markets as well as indoor shops, businesses and boutiques.

The law was originally passed in late December 2005, according to reports from the Georgian media, although protests only began on February 28. Shop owners and merchants are upset on three issues. First, they claim the cash registers – a reported 300 lari for the government approved model – are too expensive for them to purchase. Second, they argue that while no one is against paying taxes, the cash registers will encourage corruption instead of fighting it. One vender interviewed on Droeba, a program on the Imedi television station, claimed that now shop owners will skim more off the top by only giving receipts when sales are small and pocketing the larger sales. Third, according to protestors, no one knows how to use the cash registers. Georgia – like most developing nations – is a cash-based economy where it is more common to see an abacus than a calculator, and cash registers have been reserved for large stores. One merchant interviewed on television noted that he tried to ring up a sale for 14 lari but entered 114 lari by mistake; now he will be forced to take the register to the tax authorities to fix the mistake.

According to vendors, a flat tax based on their inventory would be more efficient for both sides. The government is implementing the program in an effort to better enforce tax laws; the Saakashvili administration has made improved tax revenues one of the bywords of its government and pushed through new, simplified tax legislation in December of 2004. However, a year later there are still problems with collections, largely at the local level where both officials and small business owners are unsure how much tax they are required to pay according to the new legislation.

The protests against the law picked up just a few days before the fines would be enforced, a reflection on the heavy public announcements from the ministry of finance informing the public of the penalties in store for wayward businesses. According to the ministry, stores not using cash registers by the March 1 deadline will be fined 500 lari ($273) for the first violation and up to a whopping 10,000 lari ($5,464) for each additional violation. That is a lot for small shops and vendors whose wares sell for much less.

While the advertising urged citizens to pay ‘every tetri’ for the future of their country, it appeared mere days before the law was set to come into force, hitting those affected by surprise and opening the public up to a slew of misinformation and political propaganda.

President Saakshvili was brought to power thanks to public support and public opinion. However, his government has repeatedly locked the public out of the decision-making process and closed venues for public debate. The Georgian economy needs tax revenue and cash registers are a step in the right direction. However, if the government continues to implement major reforms without properly educating the population before hand – or even considering potential problems along the way – it runs the risk of losing the valuable public support and trust needed for the difficult reform road ahead.

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