One can gauge how seriously Georgia takes customs-duty collection by visiting the country's border station at Azerbaijan: it's not on the border. The station sits nearly four kilometers inside Georgian territory - and before one gets there, numerous unmonitored roads head off in various directions. At the nearby Red Bridge Market, effectively a huge, unauthorized duty-free area, vehicles are rarely checked. "This is a remarkable thing," says Jonathan Dunne, the International Monetary Fund's representative in Tbilisi, "and you can draw your own conclusions."
When a progressive customs commissioner tried a couple of years ago to move the customs house, there was a shoot-out and the chief was soon reassigned. The conclusions have been apparent for years: Georgia has an abysmal record when it comes to import-export duty collection, even when compared to other former Soviet republics. Customs accounts for about half of tax collections, which totals 14.5 percent of GDP.
This small take is a factor in Tbilisi's chronic government budget deficits, which approach $200 million-$300 million annually. It also plays a role in the huge accumulated wage arrears to employees and pensioners and the virtual lack of state capital investments. Finances are such that core social spending is dependent on international assistance. Stronger customs collection could reduce this burden - but like the roads leading from Azerbaijan, corruption infects Georgian tax collection along many paths.
The United Nations has noted the "fantastic volume of contraband imported into Georgia," which consists mostly of cigarettes, petroleum products and alcoholic drinks. For example, one estimate shows that two out of every five Georgians are smokers. They consume about 1.5 million packs of cigarettes per day and the value of those cigarettes is over $100 million annually, the Anti-Smoking Centre figures. But official import figures understate this by roughly 40 percent according to a study by the Center for Strategic Research and Development of Georgia.
Duties on alcohol imports have run at less than one-third of estimated imports, the study also reported. While the government imposed excise stamps on cigarettes and tobacco in 1999, it has taken more disheartening steps more recently. A British firm called the ITS Group won a contract to help Georgia boost customs revenue in 1999. But the government recently opted not to renew the agreement. The firm's employees say that customs officials themselves stymied much of their effort. "We were treated as the enemy," says one former employee.
A source familiar with ITS' experience in Georgia told of an incident in which customs inspectors pulled over a truck laden with household appliances, coming from the Russian border through South Ossetia. Before the inspection could begin, the source says, a Mercedes appeared on the scene, screeching to a halt and disgorging heavily armed men who succeeded in preventing the truck from being searched.
Such a business climate discourages foreign investors. Even after paying full duties, foreign corporate managers say, customs officials often provide documents clearing only half a shipment's value. "Then you have to have a meeting with the taxman, on down the bribery chain, everyone gets you into the box where there is no way out," says an exasperated American businessman.
Representatives of the international business community have proposed to cut corruption by completely re-staffing customs and then paying the new recruits a substantially higher salary. Business would cover the estimated $6 million in pay raises for a year, after which higher customs revenue would allow the government to maintain the higher wages. "Some people are corrupt by greed, but most are corrupt by need," argues Fady Asly, the president of American Chamber of Commerce in Georgia, a food importer who has been a leading backer of the proposal. Customs salaries start at 50 dollars a month. The plan would raise salaries at least fivefold.
But many skeptics doubt that even a raise of this magnitude would diminish corruption. Even low-ranking officers can earn between $2,000-$5,000 a month in actual income, sources say, although some portion of this is passed on through the ranks of their superiors as payoff for having a job.
"Even if a worker has $500 in his pocket, $1,000 will always be better," says a European transportation executive. And an international observer doubts the attraction of bribery will fade. "With high value items like petroleum, you can never pay them [Customs officials] enough," the economic observer says. "For these guys, $1,000 a shipment is nothing."
American customs inspectors who visited Georgian borders in November 2001 recommend creating an audit team comprising Americans and Europeans to seek out "high-risk importers" under protection of the Georgian state. The customs agents also recommend arming Georgian customs guards. Like the Chamber's salary-raise plan, though, this proposal has not garnered support among Georgian politicians.
Nevertheless, the government says it is committed to implementing meaningful reforms. New Minister of Finance Mirian Gogiashvili assumed his post after leaving the Anti-Corruption Council in a springtime cabinet shake-up. Not yet 30 years old, he is the first minister to oversee both finance and state revenues, and has asked the Chamber to hold its plan in abeyance while he seeks a way to improve customs performance without it. He has little time to deliberate: a customs commissioner's average tenure during the last few years has been about six months.
In the end, eliminating customs corruption may mean confronting powerful vested interests in Georgia. For example, the US Customs team said in a report that the current situation at Tbilisi International Airport "makes customs control of arriving passengers and cargo impossible." A "Secret Presidential Directive" in 2000, according to the report, gave the Airport Security Co. the right to make first and last contact with any arrivals. The US inspectors discussed this arrangement with former National Security Advisor Nugzar Sajaia, a confidante of President Eduard Shevardnadze who committed suicide in February. [For additional information see the Eurasia Insight archives].
Stier is a freelance journalist who has worked in several countries.
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