Гармонізація земельного законодавства України та Грузії
Таке спрямування має проект «Фасилітація транскордонного діалогу для забезпечення участі громадян в прийнятті земельних рішень» Інституту сталого розвитку (Україна) та громадської організації «CivitasGeorgica» (Грузія), що реалізується за підтримки Black Sea Trust for Regional Cooperation.
Основами економік України та Грузії є використання земельних ресурсів, а земельні реформи – одні з ключових економічних реформ в цих країнах.
Земельна реформа в Україні, що розпочата у 2001 р., продовжується й насьогодні. За оцінками соціологічної агенції «InMind» (Україна) земельна реформа стала джерелом розвитку корупції (про це кажуть 72% українців), а надання у користування земельних ділянок – стало закритим та непрозорим процесом (стверджують 68% респондентів). Дані результати опитувань населення та експертів підтверджуються постійними гучними земельними конфліктами, які знаходять відображення у ЗМІ, коментуються політиками.
На думку експертів Інституту сталого розвитку, головною причиною даної ситуації є відсутність в Україні дієвого механізму участі громадян у прийнятті рішень в сфер використання земель (це підтверджують 74% українців – за даними дослідження коаліції громадських організацій «Прозора земля»). Слід зазначити, що рішення в сфері використання земель приймають органи державної влади та, в окремих випадках, якщо йдеться про землі населених пунктів, - органи місцевого самоврядування. Найбільше від даної проблеми страждають громадяни сіл та селищ, які не можуть впливати на рішення із використання земельних ділянок сільськогосподарського призначення та водного фонду на території сільських рад, в межах якої проживають.
Дані факти свідчать про відсутність діалогу між громадськістю та владою в галузі управління земельними ресурсами. Підтвердженням цьому є громадські акції на території України у 2008-2010 р.р.: 14 акцій супротиву щодо будівництва відведення земель для будівництва об’єктів без узгодження із місцевими громадами; 27 пікетів проти будівництва автозаправних станцій біля житлових будинків; 34 заходи щодо боротьби зі зносом зелених насаджень, зокрема парків; 52 громадські дії проти приватизації земель громадського використання. При цьому 7 громадян зазнали тілесних ушкоджень…
Яскравим прикладом цьому можуть стати акції громадянської непокори щодо зносу парку в м. Харків у 2010 р. В даному випадку було прийнято рішення про виділення земельної ділянки із земель загального користування зі зміною цільового використання (із земель лісового фонду на землі транспорту) для будівництва автодороги без погодження із громадянами.
В той час, в Грузії зусиллями органів місцевого самоврядування та громадських організацій, за підтримки Уряду, забезпечені прозорі механізми доступу громадян до прийняття рішень в сфері землекористування (за даними TransparencyInternational, за рівнем антикорупційних дій Грузія займає 11 місце у Світі). Функції із підготовки та прийняття первинних рішень покладено на органи місцевого самоврядування.
Саме тому Інститут сталого розвитку та «CivitasGeorgica» започаткували ініціативу щодо обміну досвідом у галузі забезпечення участі громадян в прийнятті рішень в сфері земельних відносин. Так, міжнародним проектом «Фасилітація транскордонного діалогу для забезпечення участі громадян в прийнятті земельних рішень» передбачається ознайомлення українських експертів із досвідом громадських організацій, органів місцевого самоврядування, Уряду Грузії в даній галузі. Крім того, за участі грузинських експертів буде розроблено дієвий інструментарій щодо забезпечення участі громадян у розробці та прийнятті рішень в сфері земельних відносин. Передбачено широке громадське обговорення та тестування розробленого інструментарію. За результатами проекту, інструментарій у вигляді проекту нормативно-правового акту буде переданий на розгляд Парламенту України та органів державної влади.
Маємо надію, що дана ініціатива стане суттєвим кроком щодо забезпечення прозорих та відкритих земельних відносин в Україні.
Точка зору та пропозиції, що висловлені у друкованих або електронних публікація не обов’язково поділяються Black Sea Trust for Regional Cooperation.
Інтерв’ю з депутатом Парламенту Грузії Корнелі Кукулава
(комітет з питань сільського господарства) про участь громадян в приватизації землі
переклад - Георгій Месхідзе
Land Privatization Experience in Georgia
Lessons Learned
Prepared by Mr. G. Murvanidze, Ph.D.
Tbilisi, Georgia
September 2010
Table of Content
Background
Land Resources of Georgia
Land Privatization and Land Ownership
Land Cadastre
Land privatization
2.1 Land reform and household income
2.2 Policy implications
Reforms
Legislative Reform
Institutional reform
Cadastral reform
Tax reform
Lessons learned
Legislation
4.2 Institutional Change
4.3 Centralization of Information
4.4 Staffing
4.5 Fee System
4.6 Information Technology
4.7 Tax Reform
4.8 ComprehensiveLand Registration Reform
4.9 Results achieved
Citizen’s participation
1.Background
1.1Land Resources of Georgia
Georgia is a high mountainous country. Lowlands cover 46% of the country’s territory and are inhabited by nearly 85% of the population of the country. Almost entire infrastructure, industrial and agricultural lands are located in the lowlands. However, hay land and pastures (rangelands) constitute a large part of farmland.
The main user of the land is agriculture. Georgia has always been regarded as an agricultural country and, accordingly, the share of agriculture in the GDP of the country was high. It should be noted, however, that over the past decade this indicator has fallen considerably.
For instance, in 1996 the share of agriculture in the GDP of Georgia made up 33.6 per cent, while in 2001 it reached only 19.2 per cent. In 2009 it was 17.4%.According to statistical data farmlands made up 43.4% of the overall territory of Georgia out of which arable land amounts to 26.2%, 8.9% is under perennial crops, meadows and pastures constituted 64.2%. Land covered by forests constitutes 39.9% of the countries territory. Water and wind erosion, environmentally degrading agricultural practices and other anthropogenic and natural processes has led to an almost 35% degradation of farmland.
1.2.Land Privatization and Land Ownership
The establishment of private land ownership in Georgia is considered as one of the most important achievements in the transition from a centrally planned to a market economy.
While land was deemed common public property during Soviet times, following the first stage of land reform after independence, land was transferred to physical and legal persons into private ownership.
At present the Georgian legislation distinguishes two categories of land: land intended for agricultural purposes and land intended for non-agricultural purposes. During 1992-1996 a part of agricultural land had been privatized spontaneously, while the formal right of land ownership still remained in the hands of the state. Such partial privatization created certain problems in the agricultural sector. Due to the fact that private land owners enjoyed no formal right on land, they were unable to comprehensively enact their rights (purchase-sale, lease, collaterization, etc). This factor became a disincentive for investing in agricultural development.
In 1996 the “Law on Property Rights on AgriculturalLand”, “Law on Land Registration” and “Law on Lease of Agricultural Land” were passed. These laws led to a partial liberalization of the land legislation. The enactment of these laws and the subsequent adoption of a new Civil Code (1997) have actually laid the foundation for launching the second stage of land reforms and made it possible to conclude land related transactions.
Therefore, the fundamentals for the land market have been established. As of April 1, 2000, 25.2% of agricultural land was transferred to private ownership, of which arable land represents 56.9%, 23.9% are under perennial crops and 16.6% under hay land and pastures. It is to be noted that the size of land plots transferred to private owners is fairly small (0.9 ha of land per family at average). The small size of plots and the fragmentation of farmland hampered effective land use. This has brought the issue of consolidating privatized land and the enlargement of land plots on today’s agenda.
Today, approximately 95% of land intended for agricultural purposes is privately owned or are under lease. 1115.9 thousand hectares are pastures (27.6% of the overall farmland; 86% of farmland that has not been transferred to private ownership and is not subject to privatization will remain in common use until changes in legislation).
The unfavorable location of plots, low soil fertility, the failure of old irrigation and drainage systems, desertification, secondary bogging, salinization and erosion processes can be identified as factors contributing to the non-lease and non transfer of land to private owners.
Until recent changes land registration and the process of proving land ownership rights were time consuming since a thorough review of old Soviet data was necessary. The fact that the majority of land users could not afford to pay the initial land registration fee was considered as the biggest handicap of the registration process. In 1999, Decree # 327 of the President of Georgia on “Urgent Measures for Initial Registration of the Ownership Right on Agricultural land and Issuance of Registration Certificates to the Citizens of Georgia”, has been enacted to address this problem, to expedite the initial registration of land and to facilitate the conclusion of legal land transactions.
This Decree ensured that the initial registration of land plots was free of charge for citizens of Georgia. This led to a growth of interest from the side of private owners towards registering private ownership of land, thus speeding up the initial registration process. Unfortunately, however, the Law of Georgia on Registration Fees, passed on April 10, 2002, has made registration again subject to payment.
It is important to mention that land reform in Georgia has been initiated during a period of political instability, against the background of civil war, a drastic drop of living standards and in the absence of an adequate legislative, technical, methodological and administrative framework. As a result, the reform process was characterized by many irregularities related to land use.
1.3Land Cadastre
Land privatization, the establishment of a real estate market and new forms of land management have led to an increased demand for the creation of a new land cadastre system. Today the availability of correct information on land resources and land related matters are extremely important, particularly in the aftermath of spontaneous land privatization.
It should be noted that in Georgia the distribution and transfer of land into private ownership, as carried out under the land reform, did not occur on the basis of new data and accurate mapping. This is particularly the case in rural areas. Land use maps produced during Soviet times, containing accidental or deliberate errors, have been adopted unchanged as a basis for acts of acceptance and drawings attached were used as a basis for the privatization of agricultural land. According to the opinion of experts the agricultural land fund of Georgia, compared with the currently recorded one, may grow considerably as a result of clarifying these errors.
Boundaries of land plots and plots in inhabited areas were also recorded imprecisely. It could be said that the absence of a realistic picture of land use and land ownership patterns significantly hampered the process of spatial development of the country today. The absence of spatial development plans, which would reflect a realistic and up to date picture, as well as weak state control, have resulted in illegal construction activities in residential areas. This particularly applies to the capital and other irregular spatial-territorial development of populated areas.
In Soviet times land cadastral works have been carried out in Georgia was in the 1980s, embodied a compilation of quantitative, qualitative and economic assessments of land data. Since 1994, various international financial institutions and donors have been actively assisting Georgia in the implementation of a new cadastre system. Those donor organizations carried out projects in the field of land management, completely or partially covering land cadastre and registration works. Almost all cadastre works carried out in Georgia were financed with the support of these international institutions.
It should be noted that the multitude of donor organizations engaged in the land cadastre and registration sector required great coordination of their activities. It is noteworthy that these organizations started launching projects at different times and activities were predominantly carried out independently. Organizations often used different approaches and methods and at times even have different objectives. Different technologies were applied; personnel with various qualifications were hired, etc. Under those conditions, it was critically important to ensure that the outcomes of individual projects were compatible and not mutually exclusive. Given the lack of coordination among donors, the danger arise that different cadastre-registration systems, based on different volumes and information sources, might got established in adjacent areas. With the aim of addressing this issue, a Donor Coordinating Council has been set up at the State Land Management Department of Georgia. The purpose of the Council was to coordinate donor activities in line with a common action plan.
Overall, one could say that land reform in Georgia historically has been implemented incoherently and on a piecemeal basis. Various laws, decrees, strategies and programs adopted regulated only a certain spectrum of land related issues. However, the greatest shortcoming within the state policy framework regulating land related issues was that rules assigning jurisdiction over land issues to central, regional and local state authorities were not established. The lack of clarity over this matter hampered assigning juridical powers to central, regional and local state bodies for the effective management of land resources (forests, water, mineral deposits).
2. Land privatization
Land reform was launched in the Republic of Georgia in 1992, about a year after the country gained its independence from the Soviet Union. While an impressive land individualization process has been in effect since then, the pace and the performance of this process were far from satisfactory. This was due to a combination of institutional and economic constraints. Comparable survey data from 1996 and 2003 show that the land reform has been progressing mainly through land leasing. This allowed successful farm households to expand their farming operation and improve their well-being. Land documentation has not yield the expected results and the blame may be on less than sufficient labor and credit opportunities.
Agriculture has traditionally been an important sector of the Georgian economy. After independence in 1991, the agricultural sector underwent a severe crisis, mainly due to the civil war, which resulted in the destruction of the productive ability of collective and state farms. A process of land individualization has been in effect since then, with agricultural land being distributed to private households.
Land individualization was composed of two different mechanisms: privatization and leasing.
A program of land privatization was initiated in 1992, involving an establishment of a “privatization reserve” of 850,000 hectares including 200,000 hectares already used by private farm families at that time and an additional 650,000 hectares from collective and state farms. This land was intended for allocation among existing and new family farms. By 1996, land held by private households grew by roughly 200% to a total of 628,000 hectares. By 1997, this number grew further to 766,000 hectares and by April of 1999, to 918,000 hectares.
In addition, private households leased more land from state reserves. In 1996, the government of Georgia permitted the leasing of agricultural land still under government control to private households or legal entities. By 1997, the amount of land leased to producers was almost equal to the amount held privately. Still, about half of the agricultural land in Georgia remained under the control of state agencies, which do not used it productively.
The resulting structure of the farm sector was composed of three types of farms. First, the small family farms, cultivating 0.75 hectares of land on average that do not lease land. Second, larger individual farms that lease land and cultivate 6 hectares on average. Those were perhaps the more ambitious and also possibly better connected farmers. Finally, there were the large entities that cultivated close to 100 hectares on average, almost all of it leased. In fact, it turned out that the large entities tended not to cultivate all their leased land, mainly because of capital constraints. They might be leasing the land in part for speculative reasons.
Institutional factors imposed considerable limitations on the functioning of the land market. Privateland was restricted to a maximum of 1.5 hectares per household. The distribution of both privatized and leased land was at the hands of the Sakrebulo (representative body of local government). There was huge variation across Sakrebulos in the fraction of land distributed to private hands. In addition, not all land transfers were formally complete. A transfer is only complete once the state issues a transfer certificate called a “giving and receiving act.” A large number of small farmers were still without certificates, which meant that they could not sell the land to others or use it as collateral in the capital market. Moreover, land sales between private farmers within a Sakrebulo were allowed only after all agricultural land in the Sakrebulo was systematically registered a restriction that practically prohibited all private land transactions.
These institutional constraints resulted in an inefficient use of agricultural land in Georgia. On one hand, efficient and successful small farmers could not expand their landholdings, and could not utilize their potential and grow into commercial farming operations. On the other hand, inefficient small farmers could not exit and inefficient large farmers could not reduce their size since they could not got compensated for the land and also perhaps lack of economic alternatives.
At the macro level, eliminating the institutional constraints in the land market and continuing the individualization process (including privatization and land leasing) would likely result in a land distribution that includes a much larger fraction of mid-size family farms. Much more of the agricultural land in Georgia would be cultivated, and crop yields would be higher. These have been found to be the results of land reforms in many developing countries.
Land registration that will enable private land to be used as collateral will have indirect effects on agricultural productivity through the alleviation of capital market constraints. Moreover, established property rights will increase the incentives of farmers to make costly long-run investments, thereby promoting prospects for further long-run growth of the agricultural sector.
2.1 Land reform and household income
It would not be correct to blame the decline in household income on the land reform. Farm household situation is determined, in general, by a combination of technological factors, market conditions and policy, as well as the household’s own decisions. The discussion above implied that market conditions had perhaps the most significant negative effect on household income. Hence, it could very well be that the marginal effect of land reform on household income is in fact positive.
2.2 Policy implications
What can we learn from these results on the prospects of land reform in the Republic of Georgia and perhaps more generally for transitional countries? The progress of land reform in Georgia was gradual and has not reached full coverage, mainly due to institutional complexities until recent land reforms. The land reform is composed of three dimensions: allowing rural families to own one or more plots of land; allowing farm households to lease land from state enterprises; and land registration. The merits of each dimension are reflected below.
First, the amount of land owned by rural households increase their per-capita income. This calls into question the logic of the institutional constraints on the amount of land allocated to each farmer. Supposedly, these constraints were aimed at allowing more households to obtain land, but it is not clear that the low income gained by cultivating such small plots is better than the alternative. Second, land leasing seems to be a successful channel through which the more productive farmers can expand their farm operation. The land leased tends to be marginal in terms of its suitability to the most profitable crops, but its value at the state enterprises is close to zero, and it allows farmers to enjoy much higher incomes. Leasing is also subject to lower transactions costs, and hence it was the most promising channel in which the land reform in Georgia proceed.
To summarize, it is clear that the potential of increased land market activity is still in process. A continuing specialization process that will enable successful farmers to acquire more land could improve the economic well-being of farm families even in a period of depressed produce prices. However, other rural markets, including the credit market and the labor market, need to be developed concurrently in order to allow farmers to take full advantage of the opportunities opened by the land reform, and in order to avoid negative repercussions of the land reform, namely rural income inequality and poverty.
3. Reforms
Land reform is the cornerstone of the transition of the post-Soviet states and East European countries to a market economy. There are many aspects of this reform – privatization of state-owned land and real property, implementation of a land registration system, establishment of a new legal framework and of new institutions, and introduction of land taxation systems. All of these aspects are almost equally important for a successful transition to a land market. At the same time they are tightly linked with each other, forming together a general system of land management.
In order to establish an advanced land management system in any transitional economy it is very important to ensure the following:
• to set/define the right sequence of reform areas and aspects to develop;
• to avoid a piecemeal approach to the reform and to provide for a balanced development of all elements essential for a land management system;
• to elaborate concepts and design particular systems which could be relatively easily and quickly implemented and at the same time assure sustainable development.
International experience shows that there could be different approaches in different countries. Usually these approaches are derived from the existing goals and local peculiarities of particular states. Quite often the concepts of development are also highly determined by the international agencies offering cooperation and advice.
After a relatively late start due to the situation of political unrest, Georgia has been developing increasingly in the field of land reform since 1995. Taking advantage of close cooperation and financial and technical aid from the governments of Germany and the USA, as well as international agencies (World Bank, IFAD, UNDP), Georgia is carrying out reform projects in several major areas of land management.
3.1 Legislative Reform
Setting a new legal framework is one of the basic tasks of the reform. The admission of private property after more than 70 years of solely state possession of land and real estate is an attempt at establishing a new social and economic environment in land related affairs. It pushes forward the process of formation of a free land market.
The “Civil Code”(1997) provides the general legal environment while the laws on privatization of agricultural (1993) and non-agricultural land (1998) define particular rules and conditions for the conveyance of state-owned parcels into private ownership.
The adoption of these laws has facilitated the conveyance of about 1 million hectares of agricultural land to private ownership free of charge. Privatization embraced most of the dwelling parcels too.At the same time the political decision on the privatization of land and legal support for this process did not assure the immediate emergence of private property which could be marketable. Actually a new stratum of landowners was created which lacks complete access to its property because well-defined procedures of land distribution, parcel delimitation and property registration are non-existent. Therefore, for the most part, owners could use property for their own needs, having approximate limits to property, or even deciding and setting parcel boundaries themselves, unless claims existed in cases of particular land parcels, but they could not officially transfer the title to another person Thus just a declaration of privatization of land did not resulted in the fast growth of a formal land market. Such a situation necessitated the parallel development of support mechanisms of land privatization and land market creation. In this regard the institutional enhancement and implementation of land registration systems came to be of primary importance. Adoption of the “Land Registration Law” in 1996 defined general conditions and procedural frames of the registration of land and landowners in Georgia.
3.2 Institutional reform
A significant change in the concept of land as a valuable resource resulted in the emergence of new institutions for its management. In the Soviet period land resources were almost free of charge and were considered merely as a physical basis for construction in the cities, and also for cultivation, plant-growing or similar agricultural activities in rural places. Land was rarely considered to be a scarce commodity, and therefore the most valuable and expensive resource in any market economy was practically free in the Soviet Union. Accordingly, land use largely depended on bureaucratic decisions; sometime (and very often) corruption was “playing the role” of a market mechanism.
In the above-described situation there was no special administrative unit in the former local government structure responsible for the coordination of numerous land-related activities: allocation and measuring of land lots, registration of tenants and land-users, valuation of land and calculation of land rent, control of land use, etc. Only a small part of these functions were distributed between architectural-planning departments, technical inventory bureaus, housing departments in the cities, and so-called “land arranging” (zemleustroistvo) units in rural areas. Thus information support in decision making was not perfect, and land management as a whole never had been performed with a necessary accuracy, often leading to vagueness in land use, violations and conflicts as a result.
In the new situation the functions of conducting land privatization and some other processes in land reform were passed to the newly established State Department of Land Management (SDLM) in association with its regional affiliates in administrative districts and municipalities. It doesn’t exclude participation of the Soviet period “land managers”- architectural and building departments, technical inventory bureaus and a few others- in this process. Another “conductor” of privatization - Ministry of Management of State Property- is responsible for the privatization of state-owned industrial and commercial enterprises and deals only with buildings and constructions without land.
Thus despite SDLM domination in the land management process, there was significant fragmentation and complex distribution of different tasks, duties and responsibilities between different units. It is remarkable that private sector (survey, GIS firms, etc.) had started to play an important role in land management and in the market, as well.
3.3 Cadastral reform
Emergence of the real estate market and new forms of administration resulted in an increasing demand in systems for recording and processing various land-related information. This information should mostly include data about (a) landowners, (b) the nature of their interest in land (e.g. owner’s title, type and duration of rights, restrictions, and responsibilities), and (c) land parcels (e.g. location, boundaries, size, and improvements). It could also contain some other characteristics such as land value, land use, etc. For these purposes systems of public register and land cadastre are being implemented.
Generally in most countries registration systems are designed to secure landowners rights on their property and to assure legitimacy of their rights. Thus records in the public register have mostly legal character, and their necessity dramatically increase together with the emergence of private property on land and more rapid conveyance of a property on the real estate market. On the other hand, cadastral systems provide rather detailed information about land-parcels, including its geometry, the coordinates of boundary points, precise size, and the unique identification/number of a parcel. The names of landowners are also attached to cadastral information.
It is well known that traditionally in countries with a long history of land management land registration and cadastre were developed separately for different purposes: registration as a legal approval for ownership, and cadastre for taxation needs. Nevertheless, during last few decades there is an obvious demand for the aggregation of data from these two systems into one, creating a unified multipurpose cadastre. Usually cadastral systems, especially if they are designed for multiple users (i.e. are multipurpose) serve as a basis for so called land information systems (LIS) of different levels- communal, regional, national, etc. (see Larsson 1991).
In Georgia like many other post-communist states, a significant demand emerged in security of titles, investment in and on land, during last few years. On the other hand detailed survey of all parcels, land and property owners, tenants and all other users became very important for taxation purposes. Moreover an acute need in land-related information has been expressed by architectural and planning, building, agricultural, environmental and some other institutions too.
The implementation of registration and cadastral systems are legally based on “Land Registration Law” and the forthcoming “Law on Cadastre and Land Information Systems.”
The particular work to design appropriate systems and to introduce them were started in the mid-1990s. The biggest efforts are done in the capital city of Tbilisi, which is far ahead in this field, developing modern multipurpose cadastre/ land information system (LIS) since 1996 together with the German Society of Technical Cooperation (GTZ). According to the concept of the project, the creation of a universal cadastral basis for the building of a modern LIS is foreseen.
The system combines the elements of a “legal cadastre,” i.e. records on landowners, their rights and encroachments for title registration, and a “fiscal cadastre,” i.e. records about parcels, owners/tenants, and tax rates for taxation purposes. It also contains some other data concerned with topography, buildings and constructions, land use, etc.
The production of parcel-based cadastral information is based on an up-to-date aerial survey and photogrammetric processing of images. Large-scale cadastral maps (1:500) of high accuracy are being used in title registration, taxation, physical planning, etc.
(a) It provides a universal, geodetic-adjusted basis for different users for development their own databases, on the one hand, and for sharing common information on the other. Thus it avoids duplication and big additional efforts in data management (e.g. land/title registration, taxation and planning units are using the same basic database);
(b) It allows to combine long-term and current tasks and fulfill them parallel keeping a step-by-step development approach (e.g. parallel running of sporadic and systematic registrations);
(c) It uses a modern but cost-effective technology and technical tools for data processing at present and assures its future maintenance (e.g. aerial survey and remote sensing, which provides up-to-date data for lower costs then traditional field survey does).
The experience of the capital city was carried out all over the country. The complete title registration of all landowners and a systematic cadastre began by the end of 1999 in the framework of a six-year nation-wide land management project.
3.4 Tax reform
The introduction of a new land taxation system is one of the cornerstones of land reform. Land value taxation is recognized and exercised worldwide as the restrictive power of government over private property. Moreover, it is an attractive revenue-raising tool for state and local governments. For example, in the United States, on average, property taxes account for about 75% of state and local government tax revenues.
The primary goal of land taxation in Georgia, naturally, was to raise a significant amount of revenue to fill up still inadequate budgets of most local governments. But, simultaneously, the pursuit of this goal has had secondary effects. It required the rapid collection and processing of information on parcels and landowners on the one hand and the valuation of land and property on the other. Therefore it was tightly linked with the implementation of cadastral and registration systems, and in spite of the financial burden it puts on the population, taxation could be considered as one of the major elements in the transition to market relations and to modern land management patterns.
The adoption of the “Tax Code,” in which a separate part (Tax Code of Georgia, Part VI: Land Tax) is dedicated to land taxation issues, established general conditions for determining and levying land taxes. It contains several peculiarities that differentiate it from most taxation systems exercised in other countries.
The issue of the tax base should be especially emphasized. The elements of a tax base include identification of the property that is to be taxed, and the basis on which the tax is imposed. According to the Georgian Land Tax Law, only land is the object of direct taxation, while buildings are subject to a transfer tax.
As for the tax basis, rather rarely is it other than a property’s value, either its capital market value or its annual rental value. And this is natural, since by its character the property tax is an ad valorem tax; that is, it is levied as a percentage of value. It is a tax on the value of property as opposed to a tax on the income earned from property. Tax rates usually are determined by budgetary needs, particularly by dividing the planned amount of tax income by the tax digest, i.e. the total assessed values of all taxable properties in a jurisdiction. In Georgia’s case the land tax base is different again from the most widespread international patterns. It is not directly derived from property value. It could be better ascribed to area-based patterns, with rates determined according to selected factors. At the same time separate and different approaches are established for determining land taxes for two main categories of land- agricultural and non-agricultural.
It should be noticed that the main reason for not using the value-based approach to land taxation is a lack of appraisal information and market data on land transactions. Therefore a sort of geographical/area-based approach is generally introduced instead.
In the case of agriculturally used land, the Land Tax Law directly defines the tax rates for all the administrative districts and major cities of Georgia (Tax Code, Division VI, Chapter 23, Paragraph 150). Two main categories of agricultural land are singled out- (1) arable land and perennials, and (2) hayfields and pastures. For both of these categories the law roughly differentiates the tax rate according to two groups of quality of land –good or poor for the first category (giving average rate for the districts too), and regular (natural) or cultivated for the second. Actually, by this the law establishes tax rate minimum and maximum limits for each above-mentioned territorial unit. At the same time district administrations are given the right to further differentiate their land according to its quality/productivity, i.e. to set several subcategories (between good and poor) of land and introduce appropriate intermediate tax rates. Application of this right is optional.
Thus the value of land is not a market value but a sort of “relative value” according to its productivity in comparison with other land. In the situation of an absence of market data, the application of “relative values” seems to be an acceptable solution. On the other hand, as relative values do not provide direct access to tax rates, it became necessary to establish the latter by politically approved subjective decisions. Taking into account the payment capacity of the population along with a few other social and economic characteristics, the Parliament directly defined rather low tax rates for agricultural land. The highest rates are established in the Tbilisi and Marneuli district, which is rich for fertile black soils. The average tax rate for arable land there is 47 Lari (by June 1999 1 US$=2 Lari) per hectare per year, and a maximum rate of 57. Meanwhile in several mountainous districts, like Mestia, the rates are only 8-9 Lari.
It is noteworthy that district administrations and local authorities extensively participated in the decision making process. Unlike agricultural land, non-agricultural land doesn’t receive fixed tax rates from the Land Tax Law. Instead, it sets “the basic tax rate” for all of Georgia - 0.24 Lari per square meter per year (Chapter 24, Paragraph 154). Besides, it defines that “non-agricultural land tax must be calculated by multiplication of the basic tax-rate by territorial coefficient and by parcel size… Differentiation of the territorial coefficient must be carried out according to location and zoning. Delimitation of zone boundaries and differentiation of a territorial coefficient of land rent must be done on the basis of expert social and economical valuation of territory, by reference to a physical plan or other town-planning documents of a settlement. It should be presented by an appropriate unit of the State Department of Land Management, and approved by local government authorities“(Chapter 24, Paragraph 155).
It cannot be stated for sure, but most likely the introduced land taxation system will gradually be transformed into a value-based one and will significantly increase the degree of diversity as well as land tax rates throughout the country.
The progress of land reform during last five years has substantially changed the general economic and social environment in Georgia. The gradual transition from a command system of land management towards a market-oriented one has resulted in the relatively fast privatization of state land/real property and the emergence of a free land market. These changes are based on new legislation and institutional arrangements and are strongly supported by the implementation of modern multipurpose information systems.
The tight cooperation and assistance of numerous foreign agencies and international organizations has played a positive role in the first stage of transition. At the same time it becomes more necessary to coordinate their efforts for creation of an appropriate model of land management for Georgia. This shouldn’t be mechanically copied from any developed country, but completely based on local conditions, traditions, peculiarities and needs. From this point of view the establishment of a Coordination Counsel with the participation of all donor organizations has great importance. It is also obvious that in the first stages of reform the biggest efforts were made in legislative and technical fields. Meanwhile promotion of a free land market should include development of essential market services, easy and equal access to land and cheap capital, etc. Underdevelopment or a complete lack of real estate brokerage, building maintenance, land and property valuation, credit and mortgage banking, and real estate insurance still remain as a bottleneck in the reform process. Nevertheless, the aforementioned progress makes a hopeful starting point for further development towards an efficient land and real estate market.
4. Lesson learned
With the assistance of BizCLIR, or the Business Climate Legal & Institutional Reform Project, which is a multi-year initiative of the United States Agency for International Development with the goal of improving the efficiency and impact of assistance programs intended to help developing countries improve their business enabling environments Georgian Government in 2004-2006 continued lend privatization reform.This reform resulted in creation of present land ownership situation seen Georgia. Below are highlighted the best practices, case studies, lessons learned, and in some cases worst practices, so that the lessons can benefit other practitioners in the field. All issues are available at www.bizclir.com.
3 May 2006
Secure private property rights are an essential ingredient for sustained economic growth. It is critical, therefore, that the process for securing such land rights be simple, cost-effective, and free from corruption. In 2004, the new Georgina government, elected following the Rose Revolution, initiated reforms to establish a self-financing, streamlined mechanism to provide secure and stable land rights. The result has been the establishment of a new independent registry, the National Agency of the Public Registry (NAPR), which in 2006 became a fully selffinancing entity responsible for land registration through the country. Although property registration fees have risen slightly under the new system, by streamlining the functions of the registry, clarifying legislation, and virtually eliminating corruption, the overall effect has been to reduce the real costs and time required to register property. The time to
register property has dropped from an average of 39 days to an average of 10 days.
Like other recent reforms in Georgia, property registration reform cannot be analyzed outside the context of sweeping political changes associated with the Rose Revolution, which allowed for wholesale institutional change, new legislation, and new management that would not have been possible under the former administration. The priorities for land registration reform were consistent with the objectives of the new administration’s broader reform program, which extended across nearly all sectors of governance, including reducing permit requirements and implementing “one-stop” principles for government services; strengthening property rights; increasing the role of the private sectors in providing public services; and centralizing oversight of government services. Need for Reform in Land Registration Even before the change of government in 2004, there was a broad-based consensus among international organizations, NGOs, and the private sector on the need for change in the Georgian land registration system. At that time, much of the responsibility regarding land management and registration was vested in a government agency known as the State Department for Land Management (SDLM). The SDLM, which was responsible directly to the president, had authority over a wide range of functions including privatization.
Following the Rose Revolution, which provided the framework to implement political changes not previously possible, the new Georgian government implemented much-needed reforms to the land registration process through the establishment of a self-financing, streamlined system to provide secured and stable land property rights. These institutional changes, coupled with property-related tax reforms, resulted in the elimination of corruption and, in turn, a reduction in the overall real cost and time required to register real property in Georgia. owned land; leasing of state-owned land; categorization of land for tax purposes; mediation of land disputes; and other land management activities. Several aspects of the SDLM’s operations were identified as areas of concern:
■■ Conflicts of interest. The multiple functions played by the SDLM regarding land privatization and management created conflicts of interest within the department.
■■ Political influence. At the local level, the SDLM’s offices were directly accountable to the local government, resulting in political influence on land categorization, dispute mediation, and the registration process.
■■ Multiple registrations. In some cases, the Bureau for Technical Inventory (BTI), the entity responsible for surveying and providing land cadastre sketches, acted as a double registration system, resulting in secondary fees for services and conflicting property registrations.
■■ Chamber of Public Notaries. The role of notaries in issuing certificated declaring parcels free from encumbrances added an extra step to an already confusing procedure.
■■ Funding and resources. Both SDLM and BTI were 100 percent dependent on state funding, but lacked resources to efficiently administer all its responsibilities. In 2002–2003, realizing that the SDLM was ripe for corruption, in that it was underfunded, understaffed, and subject to the influence of local power fiefdoms, the chairman of SDLM took the initiative to convene a working group to identify strategic priorities for the department. This working group included representatives of the SDLM, numerous international organizations including KfW (a German Banking Group), GTZ, SIDA, USAID, and the World Bank/IFAD, the Association for the Protection of Landowners’ Rights (APLR), and local groups. This working group consolidated support for broad structural changes in the operations of the land registry. In early 2003, a concept paper was submitted to the chairman of the SDLM outlining the following core objectives: simplification and clarification of the registry process; the streamlining of the functions of SDLM; and the establishment of a transparent, self-financing registry through differentiated user fees. At that time, however, the political environment did not encourage risk taking, and SDLM was not ready to take the steps that these proposals required. Accordingly, reforms in the area of land registration did not commence until 2004, after the election of the new Georgian government, following the Rose Revolution.
4.1 Legislation
The first phase of the reform process focused on the drafting of new legislation. It was completed
in stages and took approximately 10 months to complete. The signing of the Law on State Registry in June 2004 served to dissolve the old SDLM and establish the new National Agency of Public Registry (NAPR). The NAPR, organized as a legal entity under public law, operated under the guidance of the Ministry of Justice. This structure allowed the NAPR to be self-managed and independent from political influence. A second piece of legislation, the Law on Registration Fee for Services of National Agency of Public Registry was signed on December 2004. This law defined the fees chargeable by NAPR for its services and established specific time frames for the provision of services.
4.2 Institutional Change
Institutional change began in parallel with the legislative efforts, with the installation of new management. In February 2004, David Egiashvili, previously head of the Office of International Relations of the SDLM and active in the working group that identified possible reforms before the revolution, was tapped to be the new chairman of the NAPR. Many of the new managers brought on board to manage change, including First Deputy Chairman Tea Dabrundashvili and Tbilisi Registry Office head Nino Bakhtadze were also involved in the early reform efforts and had experience within both SDLM and international donor-funded projects. In addition to the dissolution of the SDLM, limited aspects of the functions of the BTI were absorbed into the NAPR, specifically the maintenance and issuance of land sketches. As a result, the role of the BTI is now limited to serving as the repository of the registry archives in Tbilisi. Other land management functions were shifted to the Ministry of Environment and Ministry of Agriculture, and surveying services were envisioned as a role for the private sector. In addition, the NAPR maintains land encumbrance information and issues lien certificates, replacing the Chamber of Notaries in this function and reducing the office visits for customers. While this function does not generate sizable revenues, individual notary offices continue to play a central role in preparing and notarizing real estate transaction, where fees are a percentage of the transaction value.
4.3 Centralization of Information
NAPR began the process of centralizing information and structuring the registry. Centralization
included the shifting of accountability of local offices from the local government to the NAPR central office, the maintenance of a central information management center, and the streamlining of accounting and procurement through the NAPR. The 68 local offices were retained to provide service at the local level.
4.4 Staffing
As required by the new law, human resource planning commenced in 2004, and the new agency was staffed through a transparent recruitment process. NAPR conducted over 3,000 examinations, ultimately trimming a combined 2,100 personnel employed at the SDLM and the BTI to approximately 600 staffers. Increased salaries of the NAPR staff created keen competition for positions with the agency. The average salary of the SDLM staff in 2003 and 2004 of 41 GEL/month (US $23) rose to 740 GEL/month (US $411) in 2005. The Tbilisi Registry Office has also established an incentive system with performance-based bonuses.
4.5 Fee System
The new salary system would not have been possible without the design of a fee system, which was implemented in 2005. With the exception of the initial agricultural registration, the fees under the new law are slightly higher than the official fees charged by the SDLM. There are also specific time frames for service. And while there are no specific guarantees of service timelines, the effect of the law has been to reduce corruption, as the customer has the ability to refer to the schedule and payment terms in the law.
4.6 Information Technology
The development and improvement of information management technologies continue to be a high priority for the NAPR leadership. An initial working group at NAPR, established in early 2004, identified the following needs: continued development of NAPR registration software; development and maintenance of a centralized database; integration of all registration offices into a digital information network; and the provision of on-line operations. Registration software called NAPReg has been developed employing an Oracle database interface with mapping information produced through an ESRI (GIS software provider) based format. Installation began in Tbilisi in 2005 with the technical support of GTZ and is expected to be fully operational in 2006. An online searchable database to determine existence of liens on properties will also be available in the near term in Tbilisi. Extension of digital services is limited to a few district offices that received specific support from international donors, such as Gardabani and Mkskheta through the World Bank/IFAD project. National installation of the NAPReg is optimistically targeted for 2008.
4.7 Tax Reform
With the objectives of simplifying procedures and increasing efficiency of tax collection, the new Tax Code of Georgia, signed December 2004, established a new tax structure by replacing the previous 13 national and local taxes under the old code with 6 national and 2 local taxes.
The most significant and direct impact on land ownership derives from the abolition of the 2 percent property transfer tax. As this transaction tax was enforced in practice at the land registration stage, this reform has the effect of reducing the costs of the transaction and the registration of property. Real estate brokers also report cases where clients had avoided registering property in order to avoid this tax. One stipulation in the tax code, however, creates a similar effect to the one solved by the abolition of the transfer tax. According to the law, the sale within two years of acquisition obligates the seller to pay income tax (20 percent in the case of business) on the difference between the purchase and sales price. The payment of all land taxes continues to be enforced at the registration stage. While this has not been reported to be a structural obstacle to closing real estate deals, it continues to place the NAPR in the position of enforcing tax payments and seems to depress the officially reported property values.
Although its is difficult to capture all the costs of reform with certainty, the costs can be categorized as capital costs, training costs, new personnel costs, and time lost to prepare for and implement the transition. As a reference point, the official state budget contribution to the SDLM was US $670,000 in 2003.
May 2006
4.8 ComprehensiveLand Registration Reform
The differential personnel cost between the SDLM and the NAPR are also substantial. In 2003, the budget for personnel salaries for the 1,100 staff at SDLM (not including BTI) totaled US $468,000. In 2005, NAPR expended over US $2.4 million for the staff of over 600 consultants.
Over the long term, however, these costs, while substantial, need to be placed within the context of NAPR’s current and potential revenue stream. In 2005, NAPR received a state budget contribution of US $325,000. At the same time, however, NAPR collected registration fees totaling over US $4.5 million, of which NAPR—an independent entity—contributed approximately US $1.5 million to the state in value-added tax (VAT) and employee tax contributions. In 2006, NAPR, which does not receive revenue from local property taxes, is expected to be operationally selfsustaining based on fees charged for services.
4.9 Results achieved
The most widely agreed-upon reform success is the reduction in the culture of corruption. One commenter from the private sector stated, “Today, there are no bribes.” Additionally, as noted previously, the NAPR was scheduled to achieve the objective of self-financing by 2006. Increased speed of the registration process and clarity regarding the institutions involved are also highlighted as a positive result. Previous estimate of time required for the process averaged 39 days. In practice, however, there were no specific time requirements for services, which had opened the door to “additional” payments to secure timely services. NAPR is now recognized by the public as the responsible entity for land registration, and standard registration procedures take 10 days. Broadly speaking the specific objectives identified by international and Georgian specialists in land registration were consistent with the larger market reform initiative of the new government. Notable aspects of the reform include:
■■ provided the framework to implement political changes not otherwise possible.
■■ International funding and technical support played an important role in the reforms.
■■ Georgian leadership generally took the lead in debating the strategies and designing responses.
■■ A Georgian model taking into account various aspects of Georgian reality was developed.
■■ Sustained leadership at the responsible organizations has provided a consistent, stable framework for policy.
Conclusions
The approach followed by the new Georgian government has created momentum for further reform. The Law on Registration of Rights over Real Property, approved in March 2006, also attempts to clarity aspects of the registration procedure. Specifically, it allows for the registration of “virtual properties” such as apartments in buildings under construction. Additional regulations are expected to be issued by the Ministry of Justice in order to implement these changes.
5.Citizen’s participation
The privatization story submitted by the farmer from Khashimi village – Leila Pharulishvili
In our village the first phase of privatization process has started in 1991.The amount of land privatized depended on the number of households and land area available for privatization.Land privatized in our village was divided into four categories and the land was given to households according these categories.
Category I.
The household should meet one or more the following conditions to be eligible to own land in amount of 7 500 m2:
local resident
employed locally in agriculture sector
employed in institution of the Ministry of Agriculture
Category II.
The household should meet one or more the following conditions to be eligible to own land in amount of 5 000 m2:
employees living and working locally in non-agriculture sector
Category III
The household should meet one or more the following conditions to be eligible to own land in amount of 2 500 m2:
living in the village, however registered as a resident at other location
Category IV
The household should meet one or more the following conditions to be eligible to own land in amount of 1 000 m2:
borne in this village, however residing elsewhere
The process:the commission was formed form the representatives of local administration, land planner and local residents.This commission was specifying land areas to be privatized and their locations.
The concept: the land should be privatized by lottery principle.The exception was done for the residents which were able to produce documents confirming that their ancestors owned that particular piece of the land.
Together with the villagers the commission was making site visits and land measurements and mapping the lottery was conducted at the spot.
First were satisfied those villagers who meet Category I requirements, afterward – Category II and so on.
The conclusion:however transparent, the process was very noisy and difficult to conduct.
In 1998 the second phase of the land privatization had started – leasing of relatively large land parcels.
The concept:Amount of leased land parcel was one or more hectare depending on the location.The leasing was conducted by “raion” administration. The leasing agreement was signed between the “raion” administration and the villager – the leaser for two – ten years.
Some leasers were able to cultivate the land and hence pay land taxes, however considerable amount of leasers were ton cultivation the land and much more leasers were not paying land tax.
The conclusion: Not so transparent, those with “right” connections were able to lease best plots, however this was still beneficial for increased agriculture production.
In 2003 the central government strictly obliged leasers to pay land tax or nullify the lease agreement; most of the leasers paid the tax and retained the land.
In 2004 most lease agreements have been expired, however villagers had only verbal information on the future of land reform and further privatization, no official information was available in the village.In 2004, after the “Rose Revolution”, as an anticorruption step the privatization commissions were reorganized, and staffed with new members.This process of reorganization and document transfer was completed in summer of 2005.The new commission prolonged expired lease agreements from August of 2005.
From 2005, issuing of the new lease agreements are suspended, however those leasers who were smart enough and had necessary funds take advantage of the governments offer to purchase from the government land being under the lease agreement.In fact this is a one man’s – the leaser’s auction and if case he/she pays cost of the land the plot is legally purchased and the former leaser becomes the land owner. Those, who were not able to prepare all documents, pay fees and land cost are in painful position of having land without any title and property right.
Such land plots are also subject of selling, in this situation it is an open auction in which only villagers are eligible to participate.In case none of the villagers have expressed interest in that particular plot another open auction will be arranges without any restrictions for participation.
