{"id":1881,"date":"2006-11-14T12:39:12","date_gmt":"2006-11-14T08:39:12","guid":{"rendered":"http:\/\/geoeconomics.ge\/en\/?p=1881"},"modified":"2013-03-14T12:40:03","modified_gmt":"2013-03-14T08:40:03","slug":"local-government-is-abolished-in-the-next-years-draft-budget","status":"publish","type":"post","link":"http:\/\/geoeconomics.ge\/en\/?p=1881","title":{"rendered":"Local government is abolished in the next year\u2019s draft budget"},"content":{"rendered":"

Professor Mikheil Jibuti <\/strong><\/p>\n

A feature characteristic of the countries having an unsettled legal system \u2013 frequent legislative changes \u2013 often becomes apparent in Georgia. Adoption of a law entails amendments and addenda to the new and current ones. <\/p>\n

The draft law \u201cOn Georgia\u2019s State Budget of 2007\u201d is not an exception. Along with the given draft law, a batch of legislative changes was submitted to the Georgian parliament \u2013 in particular, the following ones: (1) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn local government\u201d, (2) \u201cOn introduction of amendments and addenda to Georgia\u2019s law \u201cOn Georgia\u2019s budgetary system\u201d, (3) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn the budget of a local government\u2019s unit\u201d, (4) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn distribution of tax, non-tax and capital incomes between the budgets\u201d, (5) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn local taxes\u201d, (6) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn social-economic and cultural development of mountainous regions\u201d, (7) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn the state supervision over architectural-construction activities\u201d, (8) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn the state excise duty\u201d, (9) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn public service\u201d, (10) \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn organization of economic activities of local government and public administration bodies\u201d.
\n All these changes ensue from the draft law \u201cOn Georgia\u2019s State Budget of 2007\u201d, i.e. the norms envisaged in the given draft law will work if the presented legislative changes are implemented. Here one tradition of post-communist Georgia\u2019s budgetary life is continued: the executive power is preparing a draft of the state budget along with the current one on the basis of such legislative norms that have not been adopted in the form of law as yet, i.e. the executive power does not admit that the parliament will not adopt the amendments submitted by it. So far, it has not been disappointed in its thoughts. Moreover, the fact that the draft law was drawn up and submitted to the parliament with violation of the existing norms and that this violation will be eradicated with adoption of the budget law and concomitant laws, has not become a subject of a special discussion. I shall draw the following example in support of the aforesaid: the submitted draft budget is based on some requirements of the international standards of budget classification (GFSM-2001) that is legal only after coming into effect of the draft law \u201cOn introduction of amendments and addenda to Georgia\u2019s law \u201cOn Georgia\u2019s budgetary system\u201d that was submitted for approval. Till then the classifier of expenses\u2019 arrangements that is given in Georgia\u2019s law \u201cOn Georgia\u2019s budgetary system\u201d (Article 11) is effective. Proceeding from this, the submitted draft law is lacking the organization of expenses classification.
\n We shall not continue the discussion in the mentioned direction since we are convinced that the existing tradition will not be broken and, at the same time, our goal is to show the effect of the new legislative initiative on formation of the local government system, especially taking into account the fact that six of the submitted amendments directly deal with local government. Let us consider each example.
\n 1. Georgia\u2019s draft law \u201cOn introduction of amendments to Georgia\u2019s \u201cLaw on local government\u201d envisages filling of the legislative vacuum that was generated by cessation of the authority of the currently functioning local government and public administration bodies from the day of official announcement of the elections of representative local government bodies on 5 October 2006. According to the Georgian law, the institute of \u201clocal public administration\u201d was liquidated. Till the recognition of the authority of the local government body, i.e. till the first session of Sakrebulos and election of the first persons of the executive power, the budgetary process was held up and the authorized persons responsible for budget fulfillment at the level of municipalities and self-governing towns turned out to be nonexistent. In case of Tbilisi and Batumi, this issue was settled on 12 October 2006 when the first sessions of the newly-elected Sakrebulos were held, but as far as other local government units are concerned \u2013 this issue remains open for 30 October. That is why, whenever the first sessions of Sakrebulos take place, filling of the legislative vacuum from 5 October till holding of the sessions is necessary. However, a question can be heard \u2013 how? The submitted draft law proposes that municipalities (nothing is said about the self-governing cities, though it should be noted that the matter concerns both the former and the latter) should be declared as \u201clegal successors of the local government and local public administration bodies of the units belonging to the corresponding districts for 1 January 2006\u201d. From our point of view, it is a very rough form. First of all, how can a local government body \u2013 a new Sakrebulo become a legal successor of a local public administration body in the part that, for example, concerns the obligations assumed on behalf of the state? From our point of view, in order to avoid a mess, it is expedient that the process of liquidation of local government and local public administration bodies at the level of former districts should be implemented and what really pertains to the exclusive authority of local government should be handed over to the newly-formed bodies, but as to the part that has to do with the state obligations \u2013 here the state should be a legal successor. As for the continuity of the budgetary process, the authority of former Gamgebelis (heads of local administrations) should be prolonged till the election of the first persons of the new executive power.
\n Georgia\u2019s draft law \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn local government\u201d also envisages withdrawal of Paragraph 3 of Article 3. In particular, it concerns the establishment of the 10% upper limit for local governments\u2019 administrative expenses. It is a righteous decision, since local government should have an opportunity of maximally free disposal of its own funds.
\n 2. Georgia\u2019s draft law \u201cOn introduction of amendments and addenda to Georgia\u2019s law \u201cOn Georgia\u2019s budgetary system\u201d is basically related to implementation of the norms of Georgia\u2019s law \u201cOn local government\u201d. In particular, the words \u201clocal government bodies\u201d were quite rightfully withdrawn from the law, and instead of the words \u201clocal government bodies\u201d and \u201clocal budgets\u201d, the words \u201clocal government units\u201d and \u201cbudgets of local government units\u201d were proposed. Inculcation of \u201clocal government units\u201d in the latter ones is not correct even formally since it is at variance with the norm of the law. There should be \u201clocally governed units\u201d. The etymological and notional load also requires that. A unit, territory with its population is not that of local government, but it is locally governed.
\n The draft law envisages that Article 141 should be added with the following content: \u201cArticle 141. Reserve funds of local government units. There will be reserve funds in the budgets of local government units within the approved 2% assignments fixed for them, the directions of disposal of which are determined by the executive power of the corresponding local government units\u201d.
\n In our opinion, fixation of the reserve fund is a good thing. I would be right if the directions of this fund\u2019s utilization were determined by the law and were not entrusted to the executive power. In general, in case of a municipality and a self-governing town, disposal of the reserve fund should be implemented jointly by the legislative and executive power, since it is the power that is the closest to the population and the mobility in decision making will not be lost. Besides, there will be no material-financial grounds for confrontation of the legislative and executive power, especially since there is such threat in view of the existing legal system. This system does not clearly distinguish who is the first person. To put it more precisely, will the person that is the first one from legal point of view be functionally able to be such in all instances? All the more, it is impossible that at this time certain amount of sums should be disposed of by the executive power only.
\n If in many other cases substitution of terms did not entail notional changes, it is not always so. According to the current law, the Finance Ministry of Georgia directly participated in local budgeting, since local budgets often represented the continuation of the state budget and, for this reason, the circular and technical instructions were often sent out. Transferring of this norm to the new reality is not justified. Probably the authors of this draft law noticed this awkwardness and withdrew the requirements concerning the circular that existed in the old text and there remained an unintelligible norm that \u201cwith the purposes of preparation, consideration, submission and adoption of the budgets of local government units, the Finance Ministry of Georgia provides for the corresponding technical instructions.\u201d Either these \u201ctechnical instructions\u201d should be exactly defined or Article 26.2 of the draft law should be withdrawn.
\n In general, it is noticeable that the Finance Ministry of Georgia is the author of all draft laws and that, as it becomes clear from the explanatory cards, not a single expert from the state, non-governmental and\/or international organizations\/establishments took part in their elaboration. The fact that, in spite of the radical changes in the local government system, the draft law\u2019s authors do not differentiate budgetary relations of local government from that of an autonomous republic, is also conditioned on the same reason. As a result, most of the amendments reflect the necessity seen from the viewpoint of the Ministry of Finance. Objectionable is the amendment concerning the responsibility of the Treasury for the complete and correct accounting of the local government units\u2019 budget receipts (Article 32, Paragraph 2). The point is that a local government unit can either use the Treasury\u2019s services or not. In general, here and in many other instances non-existence of the law \u201cOn the Treasury\u201d in the country can be felt. Till then it is necessary that, the way the law on local government and public administration was substituted for the law on local government and the Constitution\u2019s requirements were met, Georgia\u2019s law \u201cOn Georgia\u2019s budgetary system\u201d should be brought to conformity with the Georgian Constitution (Article 92) and the law \u201cOn drawing up of the state budget and the order of its adoption\u201d should be adopted.
\n 3. Submission of Georgia\u2019s draft law on introduction of amendments and addenda to Georgia\u2019s law \u201cOn the budget of a local government\u2019s unit\u201d is caused by its urgency and the necessity of its perfection.
\n With cancellation of the system of \u201clocal public administration\u201d the local governments were threatened at to receiving of the national tax in the form of the income tax and the duty on utilization of natural resources. As it is known, tax and non-tax incomes of this kind are distributed in accordance with Georgia\u2019s law \u201cOn distribution of tax, non-tax and capital incomes between the budgets\u201d. In the latter one \u201clocal public administration\u201d was indicated as the beneficiary. It was necessary to change this entry. At the same time, there was no entry in Georgia\u2019s law \u201cOn the budget of a local government\u2019s unit\u201d that identified such incomes in any kinds of incomes of a local government unit. The law defines the budget\u2019s \u201cown incomes\u201d (Article 9) and \u201cthe funds attracted to the budget\u201d (Article 10). The authors of the draft law, proceeding from the fact that such national taxes and duties as the income tax and the duty on utilization of natural resources do not fall under the category of either a local government unit\u2019s own incomes or the one of attracted funds, propose substitution of \u201cattracted funds\u201d for \u201cnot own funds\u201d. This kind of amendment is justified proceeding from the given moment because it solves a real problem in practice. As to the enduring and fundamental solution of the issue, here both terminological accuracy and a serious legislative decision are necessary. In the first place, strictly speaking, the fact that sums come into the budget is not enough for them to b considered as own budget incomes. The income is an own one if the local government establishes it itself and determines its amount. The Georgian Constitution allows determination of the structure of taxes and duties as well as their establishment only by means of the law (Article 94, Paragraph 2). This norm is sure to be changed with the purpose of solving of the task of increasing the local government\u2019s effectiveness. However, the local government\u2019s right to establish the kinds of incomes is also envisaged by The European Charter of Local Government, which Georgia joined on 26 October 2004.
\n As it was said, the proposed amendment was caused by a practical problem, but it does not change the threat that, because of the current political situation, the income tax, as it was the case with the national tax, will be directed to the state budget. Proceeding from the tasks of the local government\u2019s development and also because all over the world the income tax is considered as a typical local tax, amendments to Tax Code should be introduced and it should be classified as a kind of local taxes.
\n It is proposed in the draft law that the two-year forecast for the period after expenses planning should be substituted for the three-year one (Article 13, Paragraph 2), which is caused by introduction of the system of medium-term planning of expenses.
\n 4. \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn distribution of tax, non-tax and capital incomes between the budgets\u201d
\n With adoption of the draft law, the issue of mobilization of the income tax to the incomes of local government units will be solved. At the same time, the new law will be brought to conformity with the amendments that were made in the budget sphere and local government regulation legislation. The order of distribution between the budgets of the 1% fee for legalization of covert property and the duty on copying of public information envisaged by Georgia\u2019s laws \u201cOn amnesty and legalization of undeclared tax obligations\u201d and \u201cOn the duty on copying of public information was reflected in the draft law.
\n The draft law envisages withdrawing of \u201cthe special duty on services in organization of lotteries and profitable games\u201d, \u201cthe sums liable to handing over from local government units\u2019 budgets to the United State Fund of Social Insurance for implementation of urgent and dispensary programs\u201d and \u201cannual regulation fee\u201d in view of their cancellation.
\n At this stage the submitted draft law is necessary with the purpose of avoiding the vacuum in the legislative provision of the local government\u2019s activities but, as it has already been pointed out, it is far from being perfect. It is necessary that the issue should be solved by the single Budget Code and that the budget legislation should not be dispersed. (The law on budget relations of the autonomous republics has not been adopted as yet). The issue of relations of the autonomous republics\u2019 budgets with the budgets of local government units can be considered as the main shortcoming of the submitted draft law; 100% of the duty on utilization of natural resources goes to the budgets of local government units, except for local government units of the autonomous republics. It is not the right approach. Local government units either in the territory of the autonomous republics or outside them should be in equal conditions.
\n 5. The draft law \u201cOn introduction of amendments to Georgia\u2019s law \u201cOn local taxes\u201d envisages bringing in conformity of the current Georgia\u2019s law \u201cOn local taxes\u201d with Georgia\u2019s laws \u201cOn licenses and permissions\u201d and \u201cOn distribution of tax, non-tax and capital incomes between the budgets\u201d.
\n According to the draft law, in compliance with Georgia\u2019s law \u201cOn licenses and permissions\u201d, the list of taxes on permissions for the beginning of construction and passenger transportation was specified, and the cancelled articles concerning the permissions for street trade, distribution of outdoor advertising, limitation of using of public places, changing of the functional structure and appearance of architectural units and motor transport parking.
\n Cancellation of some of the local taxes has considerably contracted the source of local government units. At the same time, cancellation of many of them urged local government bodies to look for alternative ways for compensation of budget incomes\u2019 losses, which often causes damage to citizens. For instance, cancellation of the tax on permissions for motor car parkings has entailed renting of parking lots and compensation of the tax by the rent. For the citizens it resulted in the increase of the tariff for parking of motor transport and, what is more, the one that fixes the tariff is a monopolist. Citizens fell under a monopolistic price formation, which infringes upon human rights and is at variance with liberal values. Correspondingly, the situations requires correction.
\n Obscure is the norm proposed by the draft law that \u201cthe authorized service of a local government body can conclude an agreement with corresponding legal entities with the purpose of collection of the local tax\u201d (Article 3, Paragraph 8). It is not clear whether the matter concerns a legislative or an executive body of the local government, where this kind of authority is envisaged, how compliance of legal entities should be determined, etc. If there is political will, it is better to clearly determine for the newly elected Sakrebulos who is charge for collection of local taxes \u2013 the local government unit\u2019s service, outside legal entity or both of them.
\n 6. The draft law \u201cOn organization of economic activities of local government and public administration bodies\u201d proposes withdrawing from the text of the current law the words \u201cpublic administration body\u201d, \u201clocal budget\u201d, \u201ccentral budget\u201d and their substitution for the words \u201clocal government body\u201d, \u201cbudget of a local government unit\u201d, \u201cstate budget\u201d. This complies with the legislative changes, but many norms of the current law require correction since they come into collision with the new legislative norms. For instance, the norm that \u201clocal government bodies have right to possess, use and dispose of the property that only serves for implementation of the authority envisaged by the law and delegated by the supreme state bodies\u201d (Article 6, Paragraph 1) limits a local government unit\u2019s proprietary authority and keeps it within the bounds of delegated authority. Article 6, Paragraph 3 determines the goals, for achieving of which local government bodies are given the right of implementation of economic activities. This list should at least comply with the list of the exclusive authority of a local government unit envisaged by Georgia\u2019s law \u201cOn local government\u201d (Article 16, Paragraph 2). It is also unacceptable to leave the norm, according to which local government bodies, in accordance with Georgia\u2019s law \u201cOn entrepreneurs\u201d, are given the right to set up legal entities only \u201cunder the agreement with the state executive bodies of the corresponding field (ministry, department) and, also, with their direct participation\u201d (Article 8). These examples show that after the adoption of the basic laws having to do with local government, amendments and addenda to other laws do not only come to the process of correction of terms and word order. It is a difficult process of intralegislative harmonization that has to do with many normative acts besides the mentioned ones, and it is desirable that besides one department, even a very respected one, all interested persons should take part in its drawing up so that the intellectual potential existing in the country would be utilized and good laws would be adopted with the purpose of creation of a good practice.<\/p>\n","protected":false},"excerpt":{"rendered":"

Professor Mikheil Jibuti A feature characteristic of the countries having an unsettled legal system \u2013 frequent legislative changes \u2013 often<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[36],"tags":[],"yoast_head":"\nLocal government is abolished in the next year\u2019s draft budget - Geoeconomics<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"http:\/\/geoeconomics.ge\/en\/?p=1881\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Local government is abolished in the next year\u2019s draft budget - Geoeconomics\" \/>\n<meta name=\"twitter:description\" content=\"Professor Mikheil Jibuti A feature characteristic of the countries having an unsettled legal system \u2013 frequent legislative changes \u2013 often\" \/>\n<meta name=\"twitter:label1\" content=\"Est. reading time\">\n\t<meta name=\"twitter:data1\" content=\"13 minutes\">\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#website\",\"url\":\"http:\/\/geoeconomics.ge\/en\/\",\"name\":\"Geoeconomics\",\"description\":\"\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":\"http:\/\/geoeconomics.ge\/en\/?s={search_term_string}\",\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/?p=1881#webpage\",\"url\":\"http:\/\/geoeconomics.ge\/en\/?p=1881\",\"name\":\"Local government is abolished in the next year\\u2019s draft budget - Geoeconomics\",\"isPartOf\":{\"@id\":\"http:\/\/geoeconomics.ge\/en\/#website\"},\"datePublished\":\"2006-11-14T08:39:12+00:00\",\"dateModified\":\"2013-03-14T08:40:03+00:00\",\"author\":{\"@id\":\"http:\/\/geoeconomics.ge\/en\/#\/schema\/person\/c8498c0ae03a66c87b59761fbd19b04c\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"http:\/\/geoeconomics.ge\/en\/?p=1881\"]}]},{\"@type\":\"Person\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#\/schema\/person\/c8498c0ae03a66c87b59761fbd19b04c\",\"name\":\"Admin\",\"image\":{\"@type\":\"ImageObject\",\"@id\":\"http:\/\/geoeconomics.ge\/en\/#personlogo\",\"inLanguage\":\"en-US\",\"url\":\"http:\/\/2.gravatar.com\/avatar\/bf2d8703d729f003d8905b57fcab5078?s=96&d=mm&r=g\",\"caption\":\"Admin\"}}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","_links":{"self":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1881"}],"collection":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1881"}],"version-history":[{"count":1,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1881\/revisions"}],"predecessor-version":[{"id":1882,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=\/wp\/v2\/posts\/1881\/revisions\/1882"}],"wp:attachment":[{"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1881"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1881"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/geoeconomics.ge\/en\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1881"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}