EPI Report: Regulatory Impact Assessment Tax Payment Simplification

The complexity of the treasury code and tax payment system of Georgia has been recognized as highly bureaucratic, time-consuming, and costly, creating the basis for errors and mistakes that adversely affect tax compliance and contribute to administrative and enforcement costs. The Revenue Service (RS) has to sort through excessive number of noncompliance cases and, unless one is willing to punish honest taxpayers, the RS must invest significant resources on distinguishing between mischief and error. Beyond the direct costs of noncompliance that can be measured quantitatively (e.g., time and revenue losses), these complexities have created a tremendous source of frustration for Georgia taxpayers. Furthermore, they reduce the system’s transparency and undermine the trust in its fair application.

While direct costs have been recognized as important, these complexities have also impeded opportunities for successful tax planning and analysis for the government, which results in an uncoordinated, ineffective, and inefficient allocation of resources. Moreover, they create distortions and confusion amongst taxpayers, and enforcement becomes increasingly more difficult, more costly, and less successful.

The objective of the proposed regulation encompasses an overall simplification and reengineering of the current tax system, designed to achieve clear, streamlined, fair, and efficient operations within the RS. The forecast results for the RS include improved taxpayer compliance, higher revenues, and sufficient and timely internal operations.

The technical team’s analysis demonstrates clear and measurable costs and benefits that the Georgian government can use to compare the given options. Specifically, the team analyzed two options of possible action, and the related potential opportunities and requirements:

  • Option 1: Doing nothing. This option covers “as-Is” state of current regulation, and outlines the challenges related to present legislation and practices.
  • Option 2: Analyzes the introduction of a single treasury code payment process for taxpayers, with an emphasis on the potential benefits and costs related to the reform.