By Atom Markarian
Armenian entrepreneurs may still lack legal protection against the state but they stand a good chance of winning disputes with tax authorities if they take the latter to court, official court statistics released on Tuesday suggest.
According Armenia’s Economic Court, local businesses filed 274 tax-related lawsuits against the State Taxation Service (STS) last year and fully or partly won 178 of them.
The figures show at the same time that the STS usually wins when it itself takes legal action against companies suspected of tax evasion. The Economic Court considered more than 800 such suits in 2004 and rejected only 151 of them.
The court’s chairman, Hovannes Manukian, admitted that on balance he and other judges rule in the taxman’s favor in the great majority of cases. But he insisted that “everything is done by the court in accordance with the law.” Manukian also said that Armenian business people often have reason to challenge the tax authorities’ actions but lose court battles because of their failure to make their case in a clear and convincing way.
Tax evasion has long been commonplace in Armenia. The authorities announced a major crackdown on the problem last January and have since reported a sizable increase in tax revenues. However, many of the country’s wealthiest businessmen are widely believed to underreport their hefty profits.
Some of them sit in parliament and helped to block last March a government bill that called for a substantial toughening of punishment for tax evasion. Business people convicted of tax fraud risk up to two years’ imprisonment under Armenia’s existing criminal code. The government wanted to extend the maximum jail term to seven years.
The deputy head of the STS, Artur Osikian, told reporters that the government will water down the bill before re-introducing it to the National Assembly this fall.
Another economic judge, who spoke on the condition of anonymity, complained that Armenia’s largest businesses rarely turn to courts to resolve their disputes with the tax agency. He said they instead prefer to pay bribes and use their government connections to secure their interests.
Armenian judges themselves are often accused of handing down verdicts in commercial and other cases in return for kickbacks. But Manukian claimed that they are not more corrupt than government or law-enforcement officials.
“There is as much corruption in the [judicial] system as in the state as a whole,” Manukian said, adding that “low” salaries of the judges are a key reason for the problem. “I think that when the society will not earn the right to have non-corrupt judges as long as it pays them an equivalent of just 300-400 U.S. dollars a month.”
Many Armenian judges earn much more than the figure cited by Manukian. The average salary in the country’s public sector is less than $100.