By Emil Danielyan
Prosecutor-General Aghvan Hovsepian called on Wednesday for a drastic toughening of punishment for widespread tax evasion in Armenia, saying that the existing sanctions are “absurdly soft.”
“Our criminal code envisages a maximum of two years’ imprisonment for evading tax liabilities,” he told reporters. “I would say that this is an absurd punishment, a very soft one.”
Hovsepian said that his agency will petition the Armenian government to get parliament to set the maximum jail term for such offenses at 10 years. The existing criminal legislation creates a “serious problem” for the prosecutors investigating fiscal fraud, he added.
Tax evasion is the main cause of successive Armenian governments’ failure to meet the basic needs of the cash-strapped public sector. The current cabinet’s tax revenues were worth less than 15 percent of the country’s Gross Domestic Product last year -- a very low figure even by ex-Soviet standards.
The problem manifests itself, among other things, through the widespread underreporting of revenues by Armenian businesses. Even the most lucrative of them routinely post suspicious financial losses in what many analysts see as an easy way to evade the 20 percent profit tax. Armenia’s enterprises have claimed as much as 200 billion drams ($376 million) in aggregate losses in 2003 despite a record-high rate of economic growth.
Hovsepian, who himself is believed to own several big businesses, revealed that an unidentified person was recently prosecuted for and convicted by a court of tax fraud totaling 7 billion drams. He complained that the man got off with a short sentence and was freed in the courtroom because of the time he had spent in pre-trial detention.
The influential prosecutor refused to disclose the convict’s identity, saying only that he is a “figurehead” for some wealthy individuals. Many businesspeople, he said, prefer spending several months in jail to paying up.