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New Vision of Running Audit Department of Revenue Service of Georgia

Published: February 25, 2013 | 11:53 am
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Mamuka Terashvili: “certain changes are planned and auditors will have to testify to continue activities.”

The COMMERCIAL TIMES

Private sector, the biggest tax payer in the country, is the most important contributor to the state budget. Both, previous and new government representatives claim periodical changes in legislation serve for creating a better climate for businesses to develop. Alternative Audit project, launched by President Saakashvili’s government was followed by controversial assessments; discussions on further developing the initiative are still ongoing. The COMMERCIAL TIMES interviewed Mamuka Terashvili, Head of Audit Department of Revenue Service of Georgia regarding this and a number of other already operating and planned projects.

- You’ve been appointed the Head of Audit Department in January, 2013. What is your vision of running State Audit policy?

- Strategic planning process is crucial in terms of the department management point of view. Core strategy for 2013 includes three main areas: Consistent Process of Audit Development, Development of Inspection Process Quality and Strengthening of Audit Planning and Perfection of Audit Selection Criteria.

As far as Consistent Process of Audit Development is concerned, I would say that the creation of audit guide in 2012 was an important achievement targeted at standardization of work process. Integration of audit guide in audit process will be continued. The guide requires further improvements, which will be accomplished by revealing flaws through practice. As a result, the efficiency of audit process will increase and the job will be done with less resources. The spare resources will be used for focusing on law violating tax payers.

In terms of Development of Inspection Process Quality, the above-mentioned guide is a valuable tool for learning audit procedures and technologies. Increased inspection quality will be the top priority here. A balanced program of inspection control will be worked out, which will define the level of inspection action quality. The latter will be the basis for inspectors to make firm, law-based decisions and at the same time defend the rights tax payers. In addition, Inspection Result Quality System will allow revealing the facts that require further improvements (whether it’s in regards to tasks or goals, additional training of employees or/and revision of existing audit processes).

While speaking about Audit Planning and Perfection of Audit Selection Criteria, we’ll see certain risk-criteria used by Audit Department, in accordance to which tax payers are selected for inspection. Since a new form of annual tax declaration is planned to be launched, the above-mentioned risk-criteria will have to be revised. In this respect, inspection revision of risk-criteria tax payers is planned in order to analyze whether concrete tax payers have been selected for inspection correctly. All that may cause reduction/ increase or absolute abolishment of the essence of risk-criteria in weighted ratio formation. Moreover, in addition to program selection, human factor (data analysis/third party information, etc.) involvement is also considered for selecting certain percentage of the tax payers to be inspected.

- How would you evaluate the job done by your predecessor?

- Significant works have been conducted in the department, which lets us implement the above-mentioned tasks. Better to speak about tomorrow than to recall the activities by the predecessor.

- What are the major short-term, mid-term and long-term reforms that the Audit Department of the Revenue Service will push through in the coming months?

- Audit Department is not authorized to carry out reforms independently. However, nobody’s deprived of the opportunity to come up with constructive proposals. Change for change’s sake is not what we do, we’re oriented at the result, which will be based on the high quality, lawful job done. It’s a constant process and cannot be limited within concrete timeline.

- Would you say that the Alternative Audit reform, initiated by the old government, was a success? Are there any changes expected in this regards?

- Every coin has two sides. The fact that a number of former employees of Audit Department, who were regarded the best inspectors (including the people holding managerial positions), have ‘moved to’ private sector due to different reasons, has conditioned a successful development of the Alternative Audit initiative. The latter caused indirect ‘return’ of these people to state service. It’s a welcome fact that the volume of inspection has been increased and the culture of voluntary declaration has been improved. It’s also a positive feedback that inspected tax payers are content as they do not have to pay fines. Risk factor for government is slight as the auditors authorized to conduct Alternative Audit are low-risk carrying companies. As for negative side, besides the above-mentioned good-press auditors, there are sad exceptions as well. This is why certain changes are planned and auditors will have to testify to continue activities. Above-mentioned Inspection Result Control program, which defines acceptable level of inspection action, refers to Alternative Audit as well.

- How would you assess the local audit sector development?

- Audit sector is well-developed and it’s being further developed. One of the main factors conditioning this positive tendency is the newly accepted law on accountancy and financial report, certain chapters of which are already in force since January 1, 2013.

- The ‘Big Four’ operates representation offices in Georgia. How does it influence on the local market competition?

- The fact that ‘Big Four’ operates representation offices in our country, indeed, conditions increased quality service indicator for other auditors as well. Otherwise, they will not be competitive.

- Some auditors complain about the frequent amendments made to tax code. Is it possible to stabilize annual the frequency and concrete timing of tax code changes?

- If we look at it closely, in combination with the tax code dynamic, any type of changes serve to the further improvement of legislation, tax payers either get tax decreased burden or simplified tax procedures. Thus, changes that are oriented at achieving above-mentioned goals, including the ones initiated by tax payers, are always positive.

- Are you aware of the issues that auditors are concerned with most?

- Let’s be honest and admit that each person is concerned with different problems and this is true with auditors as well. Since I have a rich experience in working in private sector (audit companies), I’m well aware of the issues troubling auditors on the local market.

- Do you plan to arrange meetings with local and international auditors operating in Georgia?

- Audit Department has the tradition of meeting with local and international audit companies and it will be maintained in future as well. We’re ready to hear their assessments regarding the job done by the Audit Department and share their best experiences.

- You have an experience in private sector as well (Isani (1991-1993), Senta Petroleum Georgia (2008-2009), Tax Consultation Group, Senta Petroleum Georgia (2010- 2012). What were the main areas you, as a business representative, were mostly satisfied/dissatisfied about by that time?

- I would condemn state interference in private sector activities. Quite often situation was managed in accordance with the commands dictated by high officials, which had a negative impact on private sector. Government ally businessmen were running the local market by their own rules. Hidden monopolists were operating in various sectors, etc.

As an audit company representative, I welcome the initiative of launching Alternative Audit. Rich experience of the people, who left government structures because of different reasons, has been positively used for state interest.

- What’s been the reason for leaving the position of the Head of Tax Inspection in 2008 and moving to private sector?

- The reason was a disagreement of views with upper officials. I resigned voluntarily.

- How ambitious are your plans for 2013? What benefit will it bring to auditors and other representatives of local business sector?

- We have quite ambitious plans. Our task is to create a consistent and refined system, which will maximally exclude human factor and will continue developing toward one direction-welfare of the Georgia, regardless who runs the country. Besides, we’d like to reach the establishment of voluntary declaration culture so that our resources will be directed only at potentially law-inobedient tax payers.

 

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