FINANCE MINISTER HEARS USG RECOMMENDATIONS FOR

UNCLAS TBILISI 002935

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/CARC AND EUR/ACE
COMMERCE FOR 4231 DANICA STARKS
TREASURY FOR OIA

E.O. 12958: N/A
TAGS: EFIN EAID GG
SUBJECT: FINANCE MINISTER HEARS USG RECOMMENDATIONS FOR
REVENUE AGENCY MERGER AND IMPROVING TAX COLLECTIONS

REF: TBILISI 2749


1. (U) On October 25, Econoff presented Finance Minister
Aleksishvili with a non-paper on consolidation of the GOG
revenue agencies (the tax administration, the customs service
and the financial police) that the Ambassador gave to PM
Noghaideli at their meeting on October 13 (reftel). Econoff
also gave Aleksishvili a copy of a letter that Paul Sunkes,
the Treasury-funded USG advisor to the tax administration on
collections issues, sent to Aleksishvili in September.
Sunkes' letter contained final words of advice, since his
program has now ended. Econoff stressed that the USG
suggestions for the reorganization of the revenue agencies
stemmed from our several ongoing programs of assistance for
all three agencies and an INL-sponsored conference in Gudauri
that focused on cooperation among the agencies, as well as
concerns voiced by the local American Chamber of Commerce.
He stressed that the main need is for written, coordinated
regulations that allow the tax and customs authorities to
develop cases and refer them to the financial police, rather
than having the financial police driving enforcement efforts.
He also reminded Aleksishvili of the concerns expressed by
the revenue agencies about the threat of criminalization of
their good-faith decisions by the financial police.


2. (U) Aleksishvili told Econoff that the consolidation
process was going well, that legislation is being drafted and
that it should be enacted by parliament in December. The
actual implementation of the merger will take place in early

2007. He said that the decision of who should run the new
agency has not yet been made. He admitted that he had heard
rumors the new revenue agency will be headed by the financial
police and that the business community is not happy about
that. He said that the decision of who will head the agency
is a political one that will involve the Prime Minister and
the President. He said he understands that the leadership of
the new agency will set the tone for its activities, and he
supports the concept that customer service, rather than
police enforcement, should become the theme of the tax system
under the combined revenue agencies.


3. (SBU) Econoff also explained Sunkes' strong recommendation
that the government use authority it already has under law to
create imputed tax returns for persons who have not filed any
return at all, based on information available to the agency
from past returns or independently-acquired information.
This action is intended to force the taxpayer to file a
return to contest the tax assessment. Once Aleksishvili
understood what Sunkes is talking about, he brightened at the
idea. Although Sunkes' letter has been in Aleksishvili's
possession for some weeks, he did not seem to have focused on
it until this meeting.


4. (U) Copies of the Embassy non-paper on consolidation of
the revenue agencies and the Sunkes letter are being faxed to
EUR/CARC.
TEFFT