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Discussion of long-term restructuring was non-prospective from the beginning – Revenue Service about Omega Group

The Ministry of Finance of Georgia and the LEPL Revenue Office carry out measures stipulated by applicable legislation for preventing growth of tax arrears and for withdrawing accumulated arrears – finance ministry representative announced at the briefing held at the Revenue Office of Georgia, dedicated to the controversy of alleged pressure on Omega Group and the latest development around the company.

The head of the public relations department of the Revenue Service, Khatia Moistraphishvili reported the statement of the office to media. The statement is given below without edition:

“Taking into account high public interest towards the developments around Omega Group recently, we want to report the detailed information related to the circumstances of the case:

Primarily, we should state that the obligation to pay taxes is a constitutional norm. Payment of taxes is mandatory in accordance with the amount and the rule determined by law. Taxes are transferred to the budget, from where they are forwarded for funding different social or economic programs, education and health care systems, for ensuring national defensibility and security, etc., hence, mobilization of taxes is a significant public interest.

OGT ltd, as the tax payer, violated the obligation of paying taxes fully and timely and its first tax arrears were accumulated in October 2014, in the amount of 18 444 GEL

By March 2015, the company’s tax arrears increased up to 147 952 GEL, besides, in the same period, under the request of the company, the right of tax mortgage was used by the revenue service on its whole property (except one property presented as security for a legal dispute). Starting from that period, the ongoing taxes were also accumulated on the account of the tax payer, which it did not pay in time and the arrears were increased.

By December 2015, OGT ltd’s tax debt increased up to 1 486 696 GEL. The company asked for postponing compulsory measures until January 2016 and this request was satisfied. By January 6, 2016, OGT’s debt reached 1 496 797 GEL. Under the request of the company, a schedule of payment was signed, though the company violated its tax payment obligation the same month and requested a new schedule, for securing of which the company submitted one real estate of the guarantor, Zaza Okuashvili.

By January 26, 2016, OGT ltd’s tax arrears reached 3 402 943 GEL. In addition, the request of the payer was approved and a new schedule of payment was accepted, which was violated almost every month and at the same time, the company used to apply to the office asking not to annul the schedule and not to take compulsory measures. These requests were made on the following dates:

19.02.2016 – tax arrears increased up to GEL 4 807 314, asked for delay for three days;

21.03.2016 – tax arrears reached GEL 6 907 586, asked for delay for 6 months;

19.04.2016 –tax arrears reached GEL 8 710 134, asked for delay by the end of 2016;

18.05.2016 - tax arrears reached GEL 10 037 802 asked for delay until the end of 2016;

All above said requests of the company were accepted.

By December 2016, the company’s tax arrears reached 20 283 115 GEL. Finally, in December 2016, the schedule of the debt payment was annulled and the order on attachment of property was issued.

By the 13th of December, 2016, the company’s tax debt increased to 20 328 962 GEL. Besides, the OGT applied for lifting attachment for three months and for not applying encashment. This request of the company was also accepted and the attachment was lifted.

By March 27, 2017, the company’s arrears were increased to 29 416 894 GEL. After the expiration of the deadlines of the previous decision (lifting attachment for three months) and increase of the debt, in March 2017, the whole property of the payer was charged with the right of lien/mortgage and was attached. Also, encashment assignments were applied on bank accounts. The property of guarantor Zaza Okuashvili was also attached.

By May 11, 2017, the company’s arrears were increased up to 30 500 389.

In the same period, OGT applied to us again with the request to lift the encashment assignments and attachment on inventory-material valuables attachment imposed on bank accounts for six months, with the condition that they would provide timely payment of the accumulated tax arrears. The request was satisfied again – the encashment assignments on bank accounts and the attachment on inventory-material valuables were lifted for six months.

After that, the company asked for the postponement of compulsory measures again, because they had submitted the request on debt restructuring to the ministry of finance.

In total, the company applied to the ministry of finance eleven times and each of their request was satisfied in order to avoid taking compulsory measures, however, since the end of 2017, the tax payer stopped to pay the accumulated debt, after which the amount of the arrear increased up to 38 million from 26 million.

The last time when the company addressed us not to take compulsory measures was in February 2018 (14.02.2018), when its debt already constituted 35 225 782 GEL.

The company’s request on not taking compulsory measures was no longer approved and in August 2018 the bank accounts were charged with encashment and material stock.

By the 7^th of August, 2018, the company’s tax arrears reached 49 159 970 GEL.

Proceeding from the information above, it is evident that the case is about the tax payer, which permanently violated the tax obligations postponed many times and instead of revising and reducing those arrears, they used to accumulate more debts.

Considering the circumstance, when the company had already violated the agreements signed about the postponement of tax payment deadlines, also, their own condition undertaken regarding the timely covering of the debt, the holding of the session of the “Commission for Examining the Reasonability of Restructuring Tax Arrears and Loan Arrears” was non-prospective from the very beginning. The correctness of this decision was proved by the following actions by the company (permanent growth of the debt)

Considering the risks said above, by taking into account the public interest of withdrawing taxes and giving the company the opportunity to continue its entrepreneurial activities, by using the mechanism of postponement of the deadlines for payment of tax arrears and by not taking compulsory measures towards OGT ltd, the company was given several times an opportunity to conduct its entrepreneurial activities without obstacles and simultaneously, cover tax arrears, however, the company did not reduce the amount of the arrears and instead, continued to infringe the violate the tax obligations and to accumulate the debt.

Consequently, the ministry of finance of Georgia and LEPL Revenue Service are performing the measures stipulated by law aimed at preventing growth of tax arrears and at withdrawing existing debt.

In addition, it should be noted that in March, 2018, the Revenue Service applied to the Tbilisi City Court for a permission to realize the attached property of OGT ltd. Tbilisi City Court satisfied the request in June 2018, which was appealed by the company as stipulated by the law. Under the ruling of the Court of Appeals, the company’s appeal was rejected and the Revenue Service was finally given permission to realize the attached property”, – says the statement.