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SME Legal Environment Meeting Minutes, October 07, 2005
- INSPECTIONS REFORM
Update on the preparation of the Inspections Law and Tax Code reform ? IFC/SME
Florentin Blanc, IFC/SME project, informed about the current status of the inspections reform. The draft Law on Inspections was ready in August, and submitted by the Antimonopoly Agency to the Government. However, the Ministry of State Revenues opposed the inclusion of tax inspections in the law. After many discussions with donors, government and MSRD, it was agreed that one way forward could be to exclude the Tax Department from the scope of the Inspections Law, but to reform tax inspections through changes in the Tax Code.
The project has been working closely with MSRD to prepare these proposed amendments as fast as possible. The provisions will be as close as possible to the ones included in the draft Inspections Law, and should reduce the number of inspections the entrepreneurs are subject to and strengthen entrepreneurs? rights..
Mr. Douglas Cruickshank, USAID-TFI/PRAGMA, underlined that changes should also be made to the Customs Code to bring it in line with the Inspections Law or, were Customs to be excluded from the Law too, to adopt similar provisions. As a result of the new Customs Code, indeed, the Customs Department can now inspect entrepreneurs and not only goods at the border (this change aims at changing the borders inspection system, so that it becomes selective and risk-based, and not anymore 100% of goods). This point was noted as very relevant and it was agreed to consult TFI project on the proposed changes.
- PROBLEMS WITH THE TAJIK UNIVERSAL COMMODITY EXCHANGE
Presentation re. problems with export of canned foods ? USAID-TFI/PRAGMA
Subsequent discussion on TUCE, including cotton sales
Akbar Muratov, USAID-TFI/PRAGMA, presented the overall issues, then Iskandar Shomurodov gave a detailed presentation, on the obstacles posed to export of canned products by the TUCE system.
TFI is working on improvement of trade and investment climate in Tajikistan, and in particularto assist Tajikistan to enter WTO.
A survey was made to identify the obstacles existing for producers/exporters of processed food products. The survey resulted in a flow chart of the export process, and highlighted the TUCE system as one of the main problems..
The current situation is that in order to export canned food the exporters must get many permissions, including from TUCE. While other steps are more or less understandable, the latter is less so, and in total exporters have to pay too many fees and charges (including ?non official?) to receive the required documents. The key issue is that according to regulations adopted in 2001, the TUCE system should not apply to canned foods at all (list of products to which it should apply and TUCE system: see description in annex). The requirement to register contracts for export of canned foods with the TUCE is therefore without legal basis, puts an illegal additional cost on businesses, and again shows the problems with implementation of even modest business environment improvements.
An additional difficulty is that TUCE contract registration has to be done in the TUCE central office in Dushanbe, and cannot be done in Khujand.
The survey focused only on the canned food sector, as it is essential for SMEs development in Tajikistan.
In the course of discussion the conclusion was made that generally the TUCE has little use nowadays, while being the cause of heavy obligatory payments for entrepreneurs.
TUCE was identified by the entrepreneurs as the biggest obstacle to their activity. There was an agreement to have coordinated donor pressure to remove TUCE requirement for canned goods.
TUCE regulates also the prices for cotton, and this single issue creates many cases of corruption. The exchange has had an important effet in setting minimum prices for producers, but its disadvantages clearly outweigh its advantages.
In the cotton sales process, there are also problems with the transportation charges - the transportation costs are set 10% of the contract value regardless of it being for export or internal trade, which makes delivery too expensive for the local buyers.
It was decided to try and lobby the Government of Tajikistan to switch to a lighter and less costly regulatory system for cotton.
- LICENSING
Update on ongoing work on changes to the licensing law ? USAID-TFI/PRAGMA
Nigina Salibaeva, USAID-TFI/PRAGMA, gave an outline of the project implementation process and updated on the status of the licensing reform.
Last year the licensing law was adopted. After a year of its operation a survey on its implementation was conducted, discovering a number of problems. After studying the results of the survey, a draft law on changes into the licensing law was developed and submitted to the President?s Office.
World Bank and IFC are also working on reforming the licensing law, and closely cooperating with PRAGMA.
In the course of discussion, agreement was reached on the point that one of the current principles for licensing, aimed at ?protecting the interests of society?, is far too broad. It was agreed to propose to reduce the number of activities subject to licensing.
PRAGMA suggested to add a new Title in the law for ?licensing of import/export activities?. Florentin Blanc asked if there was a necessity for this. Nigina Salibaeva explained that, as these activities are out of the Licensing Law, each governmental institution establishes their own rules and regulations for these activities. It was observed, that as Tajikistan intends to enter WTO, it should be kept in mind, when drafting or revising legal acts, that they are to comply with WTO Agreements.
Another discussion concerned licensing of explosives and chemicals production/storage. Basically, WB and IFC are proposing to have most issues related to this excluded from the Licensing Law, as they are already regulated by Fire Safety rules, permits and inspections.
It was agreed that PRAGMA, IFC and World Bank would meet to define a common position on all issues, and make a joint proposal for the President?s Office, including a further reduction of the number of licenses.
- PROSECUTOR?S OFFICE IMPACT ON BUSINESS DEVELOPMENT
Short update by IFC and others
The Prosecutor?s Office is a very powerful structure in Tajikistan, and most other government structures are very careful about it.
A new Law on Prosecutor?s Office has been adopted (amendment to the Constitutional Law already existing), as well as a Presidential Decree. Both have further strengthened the Prosecutor?s Office powers.
There are a number of problems with the structure of current Tajik law as it affects the Prosecutor?s office.
The first problem is that the law gives to the Prosecutor the responsibility to oversee the correctness of court decisions, which is a violation of the principal of separation of powers and the concept of judicial independence, both of which are expressly required by the Tajik Constitution. The Prosecutor?s Office itself, denying generally accepted constitutional theory, claims to be a separate power, distinct from the 3 branches of government. Secondly, Tajik law gives the prosecutors power to intervene as a party in every case in the courts, even commercial cases that do not involve the government in any way. This power of intervention violates modern procedural norms and goes against the principle of judicial independence. Finally, the procedural codes of Tajikistan include the notion of ?Supervisory Power,? which allows court decisions to be annulled and re-adjudicated well after the period for appeals has run. One of the authorities that can invoke Supervisory Power is the General Prosecutor, and it has done so several times, even recently annulling an important decision of the Supreme Court. Supervisory Power (known as ?nazor? in Russian) has been heavily criticized by the European Court of Human Rights because it contravenes the well accepted requirement of judicial finality. Judicial finality is important for a market economy because it creates a stable rule of law system and makes the outcomes of commercial disputes more predictable.
The Prosecutor justifies these powers, now reaffirmed by the revised Law against all donors? advice, and expanded by the Presidential Decree (which gives the Prosecutor?s Office the right to obtain information from all inspecting bodies, and to order inspections at will), by saying they are there to help the Prosecutor?s Office fight corruption. In fact, it would be much better if the Prosecutor focused its attention on fighting corruption through regular criminal investigations rather than through the exercise of discretionary, excessive powers that violate well established principles of democratic government and the Tajik Constitution. Excessive discretionary powers, as a rule, rather increase opportunities for corruption.
It was agreed that high-level donor pressure is required on this issue. The attendants concluded that to fight corruption successfully, reduction, not increase of the state power is needed.
List of Participants
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