The Armenian government’s tax collection agency confirmed on Friday reports that it has withdrawn its “permanent representatives” from two dozen lucrative firms suspected of tax evasion.
The representatives were deployed there this summer in accordance with legal amendments meant to toughen the government’s crackdown on tax fraud. The State Revenue Committee (SRC) was empowered to have unrestricted access to company books and thus check the veracity of their financial statements.
The government pushed the bill through parliament late last year only after agreeing to limit the powers of SRC representatives. In particular, the latter were not allowed to enter and inspect production facilities at will.
The SRC deployed tax agents at 24 companies with annual sales exceeding 4 billion drams ($11 million) and/or quarterly imports worth over 500 million drams. Among them are Armenia’s leading importers of basic foodstuffs, alcohol, cigarettes and drugs. They have long posted suspiciously modest profits contrasting with the conspicuous wealth of their owners, many of them government-linked businessmen.
According to Ruben Kocharian, the deputy head of the SRC, tax officials have finished monitoring 21 of those firms, complying with a legal provision that bans tax representatives from spending more than 180 days a year at a particular company.
“Violations have been found in some economic entities,” he told RFE/RL’s Armenian service. “None of them has presented written objections to our reports. They just rectified those violations during the working process.”
Kocharian declined to name any of these corporate taxpayers. Nor would he specify the amount of extra tax revenues raised by the SRC through its representatives. He said only that some of the inspected companies were found to have understated their sales by 10 percent.
The official insisted that the practice has a “huge prophylactic significance” in the government’s stated efforts to improve tax collection, which has long been the Achilles heel of its economic policy.
Government critics continue to challenge the wisdom of assigning tax representatives to selected firms. Vahagn Khachatrian, an economist affiliated with the opposition Armenian National Congress (HAK), called the measure “needless and useless.”
“It is the arbitrary actions of government officials, rather than laws, that work in Armenia,” Khachatrian told RFE/RL. “It is the most high-level officials that decide how particular businesses should operate and be taxed.”
The oppositionist claimed that government-linked businessmen continue to receive privileged treatment by the SRC and get away with tax evasion.