In addition to writing about Poti’s port upgrades in the summer issue of Investor.ge, I also took a look at the government’s attempts to regain the business community’s trust after a period of aggressive raids by tax authorities left Georgia’s big businesses feeling besieged.
While the Georgian government has tried to get back in business’ good graces, the perceptions of the general public has also gradually become more positive towards the economic elite. But why?
Despite a rocky relationship with business in the past, the government is working hard to create better ties with the private sector.
New state intiatives – including a business ombudsman to advocate for tax-payer rights and a business council in parliament – are easing tensions between the government and business.
Last December, President Mikheil Saakashvili said in a speech that there were “many deficiencies” in the relationship between the government and the private sector, admitting that business leaders felt that “the State does not listen to them appropriately and treats them unfairly”.
The speech marked a step in the president’s year-long campaign to repair the frayed relations – damaged, in large part, by a period of increasingly aggressive raids and hefty punishments for tax crimes at the hands of Georgia’s Financial Police.
Lawrence Sheets, International Crisis Group’s Caucasus project manager, said in an interview with Investor.ge that the government’s ballooning foreign debt, which is projected to reach 43.2 percent of GDP in 2011, put pressure on the authorities to increase tax collections, resulting in a soar in both the frequency of tax raids and amounts of the eventual fines. Georgia’s economy also contracted by 3.9 percent in 2009 following its 2008 war with Russia, further straining tax revenues.
The government responded to the growing gulf of distrust between the public and private sectors by first hiring former AmCham customs specialist Giorgi Pertaia to advise the prime minister’s office and serve as a “bridge” between business interests and government authorities.
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