The reason for the changes implemented in the “Tax Code” may be the interests of the founder and honorary chairman of the ruling party, Bidzina Ivanishvili. However, at the same time, these changes will increase the risk of inflow of capital of criminal and Russian origin into Georgia, – said the statement of Transparency International – Georgia.
“It is mentioned in the international transparency statement that the initiation of the aforementioned legislative change in parallel with the “Russian law,” and its accelerated consideration, raises doubts that its purpose is actually to facilitate the transfer of the assets of Bidzina Ivanishvili’s offshore companies to Georgia.
“According to the proposed amendment, in case of transfer of assets of an enterprise registered in a country with preferential taxation (offshore) to a Georgian enterprise, a number of tax benefits will be established:
a) In the framework of the asset transfer operation, the income received by the offshore registered foreign enterprise and its owner natural person is exempted from profit and income tax;
b) importation of assets or goods into Georgia is exempted from import duty;
c) A Georgian enterprise that receives assets from offshore is exempted from property tax until January 1, 2030.
According to the explanatory note of the draft law, investments in Georgia are often made by companies registered offshore, which do business through subsidiaries in Georgia, which includes the risk of tax evasion. The transfer of assets to Georgia through an “offshore company” will reduce this risk. It is also noted that this ensures transparency of activities.
Initiation of the said legislative change in parallel with the “Russian law” and accelerated consideration raises the doubt that its purpose is actually to facilitate the transfer of the assets of Bidzina Ivanishvili’s offshore companies to Georgia. The fact that Russian businessmen and oligarchs often use the practice of offshore companies should be taken into account, and with the current legislative change, they will also be given the opportunity to transfer their assets to Georgia with tax benefits. Also, since the tax relief applies to the import of goods owned by an offshore company, it also applies to goods that may not be related to business activities – for example, high value and luxury items such as works of art.
Based on the 2021 study of “Transparency International – Georgia”, Bidzina Ivanishvili owned 20 offshore companies.
Precisely because of the opacity of offshore companies, our organization has been asking for years to create a register of beneficial owners of offshore companies, which would reduce the risks arising from the anonymous ownership of these companies. Anonymous ownership in turn increases the risk of corruption, including tax evasion.
However, the authorities did not work in this direction and became interested in future risks from offshore companies only when, due to the adoption of the “Russian law”, the probability of sanctions against Bidzina Ivanishvili and persons close to him from Western countries increased significantly.
In the explanatory note of the legislative change, there are no arguments as to why it was necessary to review the existing change in an accelerated manner. Technically, this topic was initiated in one package with the individual tax debt write-off initiative, and the argument for expedited processing is made on the debt write-off part, not on the offshore companies part.
This initiative clearly shows how much influence Bidzina Ivanishvili has on the executive and legislative authorities and how the laws she wants are approved in an accelerated way, without extensive discussion on the issue.
It should also be noted that offshore companies are often attractive to individuals with assets of questionable origin, and if Georgia implements a regime facilitating the transfer of assets from offshore, it should also set a high standard of transparency. The identity of the persons who will transfer the assets from offshore to Georgia should be made public,” the statement said.
