Tax administration is one of the main directions of developing a tax system of the country. Many scientific works are devoted to studying this issue, but in spite of this studying the opportunities for improving tax administration still retains topicality at this moment. Analyzing modern tax administration practice has shown that cases of purposeful tax law violation are frequent, accordingly while dealing with tax payers the tax authorities should lay special emphasis on the prevention of hiding taxes that will definitely condition the rise of culture of paying taxes by tax payers. In order to improve the tax administration in Georgia, it is necessary to improve and develop the system of tax privileges in tax legislation, to assess tax violations and relevant liability measures in the tax legislation of the country and make correspondent amendments, as well as to normalize the intensity of adopting taxation regulating acts. As a result of carrying out the abovementioned activities in the country business will have the sense of safety within stable business environment.

Keywords: Tax administration, tax culture, tax privileges, tax reform, tax monitoring.
JEL Codes: H20, H21, H24, H25

Introduction

Providing budget incomes for the country is a part of correct tax politics, while the formation of a proper tax system mostly depends on addressing the problems of tax administration. Tax administration practice in force at the moment requires certain improvement. We consider identifying the problems existing in this regard and searching the ways supported by scientific evidence for addressing them as the most important approach for developing the tax system of our country. The aim of the work is to present the practical issues of tax administration and work out the methods of improving administration in accordance with them. According to the objective we aim at studying the normative basis of tax administration and working out the recommendations for improving them. To carry out the research we used the methods of analyzing, comparing and interviewing taxpayers.

Tax Culture as a Tool for Effective Implementation of Tax Administration

Developing and improving tax administration is a real attitude for achieving strategic aims of modern tax politics, which implies using economic levers, methods of analyzing and forecasting in tax relations. Efficient system of tax administration ensures on the one hand, meeting the parameters of the tax system of budget and on the other hand, creating solid material basis for future economic development. Efficient system of tax administration enables to boost the culture of paying taxes and regulate tax relations in the country. State politics applied in a tax administration must be adjusted to current political and economic amendments. Tax administration has social function as well, because governing taxes by the state is a lever enabling the state to get involved in the process of income formation of each citizen.
From the 90s of the 20th century administrative methods of managing economics were neglected in Georgia and the state adopted economic methods of management, along with other topical trends, the function of tax administration and necessity of its improvement drastically increased in public management. It is known that the basis of developing tax administration is the legislation regulating taxation. In compliance with the Tax Code of Georgia “tax administration “is the complex of forms, methods and rules connected with providing tax calculation, payment, declaration, tax control, registration of tax payers, providing information and fulfilling tax liabilities. Though tax environment as a whole and smooth functioning of the country’s tax system depend on other not less important factors e.g. tax culture. We should consider it as the system protecting legislative norms, principles and procedures, which is formed in the process of tax relations existing between tax payers and governmental bodies. Tax culture determines legislative activities of tax payers and tax authorities and ensures dynamism of the tax administration process.
The concept of tax administration culture together with some legislative aspects includes social phenomenon as well, because fulfilling tax liabilities by tax payers requires not only meeting demands enforced by the law, but contributing to the formation of social well-being, with tax payers as its inseparable part.
The level of tax culture in Georgia is an important indicator of developing tax system, because the effectiveness of taxation mechanism can be reached due to developing the level of economic and taxation culture. Correspondingly, law taxation culture of the participants of tax relations does not afford to effectively carry out tax administration, which is caused but certain factors. Namely, tax payers try to hide taxable income in accordance with their own property interests; moreover, often tax payers do not have proper knowledge regarding fulfilling tax liabilities. On the other hand, some representatives of tax authorities do not assume liabilities properly and in some cases are not sufficiently knowledgeable in legislative details and procedures and as a result it negatively affects the functioning of country’s tax system.
Analyzing country’s taxation practice has made it clear, that cases of intentionally violating tax liabilities are more frequent than accidental offences. In accordance with this fact in relation with tax payers the tax authorities should concentrate on preventing hiding taxes instead of using repressive mechanism that will effectively influence boosting the level of taxation culture of tax payers.

Impact of Changes in Tax Legislation on Increasing the Efficiency of Tax Administration

Since the 90s of the 20th century after gaining independence, Georgia has actively been carrying out taxation reforms. On 1 January 2011, the third “New Tax Code of Georgia” was adopted, which aimed at boosting the effectiveness of tax system, simplifying tax administration for tax payers, and decreasing time necessary for tax procedures.
In spite of positive amendments made to tax administration process, the tendency of adopting new amendments frequently to legislative norms of tax legislation is still preserved, and this fact complicates timely acknowledging tax legislation by tax payers, apart from this these circumstances weaken entrepreneurial activity and increases negative attitude of tax payers towards tax authorities and overall negatively affects harmonization of relations between the state and a business sector.
In order to study taxation attitude and the effectiveness of tax administration mechanism in Georgia, legal entities and natural persons carrying out entrepreneurial activities were interviewed according to the regions of Georgia by means of a questionnaire designed by us. After analyzing the answers provided through the research it was found out that for 45% of the interviewed tax payers some norms of Tax Code are vague. Tax payers have also disapproved of frequent amendments made to legislative acts, which considerably increases the risk of fining entrepreneurs. In accordance with reproaches made by the entrepreneurs we have analyzed the amount of amendments made to Tax Code in 2011, it turned out that since new Tax Code entered into force 25 amendments have been made during a year (2011), which were adopted at different periods of the year. High number of changes hinders proper comprehension of amendments made to legislation ensuing from the period required for entering into force. According to the results of the survey a vast majority of the interviewed people fairly considers that the amendments made to tax legislation must enter into force from the first of January of the next year, herewith the changes should be recorded in the code at least 2 months’ prior, no later than November 1 of the corresponding year.
Frequent changes made to tax administration normative acts force many tax payers to address auditing companies for help, for minimizing the risk of tax audit with the help of their experts, because due to vagueness of legislative articles of tax code and in some cases stylistic errors, multiple ways of interpretation are affordable and consequently, foster the idea on which the interested party relies. Accordingly blemishes of the tax legislation in some cases cause an unfair punishment of tax payers, which is later followed by increasing the number of tax disputes.

Best Practices, Reforms and Challenges of Payment Legislation

In order to improve tax administration, the institute of a business ombudsman has been created in the country, whose activities are regulated by the Law of Georgia on the Business Ombudsman. A business ombudsman by balancing the interests tries to reach the consensus of the disputing parties. The institute of business ombudsman is eager to assist entrepreneurs to protect their legal interests in the process of entrepreneurial activities, in case of violating them by administrative bodies. It should be noted that on the basis of improving this law the functions of the business ombudsman must be refined even more and efficiency of his activities should be promoted.
In Georgia the principle of GOOD FAITH was activated for honest payers-warning instead of fine. Tax legislation considers it possible but not mandatory to use warning for certain types of tax violations, thus applying this principle depend on tax authorities, that triggers the necessity of improving this principle.
Among reforms carried out in tax system, submitting electronic versions of tax declarations, primary tax documents and tax disputes is very succesful one, which has considerably simplified the relations between tax payers and tax authorities.
Tax administration in Georgia is carried out by a Reveniew Service - a legal entity of public law of the Ministry of Finance of Georgia with its own structural units: Audit Department, Service Department, Tax Monitoring Department, Custom Department, Administration Department.
Apart from these units National Bureau of Enforcement, units of self-government, a legal entity of public law -National Agency of Public Registry, banks, declarants , etc are involved in the process of carrying out tax administration. Since January 1st , 2016 treasury codes devided in accordance with the types of taxes has been united, in order to simplify the activites of tax payers and taxes are mobilized according to one treasury code now. In 2017 a new Estonian model of frofit tax came into force in Georgia , with main purpose to create convenient environment for attracting direct foreign invesmnets in the country and simplify tax administration procedures. Since 2019 electronic platform has been applied, which promotes VAT regulating automatic model.
New “custom code” has come into force since January 1, 2019 in the country, which meets many challenges in Georgia, but there are still some issues in terms of administration requiring further improvement. Namely, in accordance with a new code business pays 18-30% of import cost, and then the income received from realization is detained. In accordance with a new code the liability of paying custom duty has been reduced from 30 to 5 days for large companies. As a result of this change large companies have some problems with monetary resources flow. Reveniew Service of the Ministry of Finance should support rising the awareness of tax payers, to make the representatives of small and midsize business well informed about the amendments.
It is essential to define optimal amount of collecting taxes for the formation of effective taxation policy; This problem became especially notable during pandemic, when the enterprises had to work under restrictions caused by pandemic. For excluding such problem in the future, taking into account this fact, the state should regulate optimal volume of collecting taxes.
The most important blemish of tax administration nowadays still is the fact, that the tax system of Georgia does not have differential and progressive taxation structure. Proportional taxation system simplifies the task, but makes taxation liabilities of the “rich” unfair. In the modern developed state much attention is paid to the issue of just tax policy, unfortunately the index of social inequality is very high in Georgia, that clearly indicates unequal distribution of income between different social classes, which is directly connected with the level of poverty of population.
It should be noted hereby that Georgia harmonizes with directives of the European Union in regard with VAT, that will in the future enable to improve current situation concerning problems of taxation.
While studying legislative basis of tax administration it was figured out that much attention should be paid to intensity of making amendments to legislative acts. That’s why corresponding institutions should acknowledge what time and material expences are necessary for business to get acquainted with, analyze and then use each amendment. Thus, taxation regulating acts must be based on three main components: neutrality, stability and simplicity. Neutrality implies the formation of such legislative acts, which to a greater extent will take into account the interests of the state as well as of entrepreneurs. By stability I mean normalizing the amendments intended for taxation norms and simplifying implies drawing up such legislative normative documents, which will not allow multiple interpretation.
Preparing and issuing normative acts in Georgia is regulated by the Law of Georgia on “Normative Acts”, according to which the amount of amendments and period intended for normative acts are limited. Due to the peculiarities of tax legislation, entrepreneurs are especially sensitive, which necessarily requires regulating the amendments to be made. And that is why we consider making amendments to relevant legislative acts to be reasonable, in order to refine on terms of issuing and applying tax administration regulating instructions and rules and making amendments.
After carrying out all the abovementioned procedures all entrepreneurial subjects and investors will have the sense of security and stability, so that nobody will issue additional arbitrary regulations and increase taxes and there will be a foreseeable market in the country, one definite group will not have an opportunity to change the game rules and deteriorate business environment.

Conclusions

In accordance with the abovementioned discussions and conclusions some recommendations and suggestions can be made to be put into practice in the future:
1. It is advisable to improve and develop tax privileges in tax legislation systematically. In terms of adopting and improving tax reliefs the state should apply the policy (including amendments to legislation) that will first of all ensure equal accessibility of these reliefs for all types of legal entities, and on the other hand, timely acknowledgement of notes and interpretations of this part of legislation reliefs among tax payers, that will itself ensure precise identification of the tax load by tax payers.
2. Assessing tax offences and relevant legal measures and making corresponding amendments in the tax legislation of Georgia. The legislation has been considerably improved in this respect, though it is not sufficient and optimal solution for decreasing offences and preventing ignoring legislation by tax payers. We reckon that it is necessary to form the legislation regarding tax offences and liabilities for violations in the way that on the one hand a tax payer shall not be able to ignore it, and on the other hand, its scale (percentage and numeral volume) must not cause demotivation to get involved in common business-activities, destabilization of payer’s activities and must not prevent him from achieving economic aims.
3. Working out-adopting differential and progressive taxation structure. In this respect differentiation of local taxes (property tax) only is not enough, because in modern developed states considrable attention is paid to the issue of establishing just tax policy that can not be reached without relevant attitudes in common state taxation. We think it is important to start working on legislation in this regard, in order to reduce unequal distribution of income among social classes and the index of social inequality. The abovementioned will ensure equalizing real taxes in the country, which is one of the most decisive conditions for increasing the formation of joint demand.
4. Normalizing intensity of issuing acts regulating tax activities . The survey of payers suggests that making amendments to the normative acts of Georgia and putting them into practice is a sensitive issue and requires normalizing. It is essential to ensure regulating the amendments to be made to the “Law of Georgia on Normative Acts” in accordance with the peculiarities of tax legislation. That will simplify identifying reasonable terms for issuing tax administration regulating instructions and rules, making amendments and applying them.

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