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Armenia’s export-oriented mining and metallurgical industry has continued to expand this year despite a major fall in international prices for non-ferrous metals, according to official statistics.

The government data publicized by Energy and Natural Resources Minister Armen Movsisian this month also shows a sizable decrease in taxes paid by local mining companies. Movsisian attributed that to the lower prices of copper, molybdenum and other base metals in the international markets.

However, opposition politicians and other government critics claim that the drop is a further indication that the industry continues to underreport its earnings and evade taxes.

The data presented by Movsisian during a cabinet meeting chaired by Prime Minister Tigran Sarkisian shows that aggregate output in the sector rose by 10 percent to 150 billion drams ($370 million) in the first nine months of this year. The physical volume of metals and metal ore concentrates, which are Armenia’s main export item, was up by 36 percent in the same period. Movsisian said this disparity resulted from lower international metal prices.

The minister said the price fluctuations were also responsible for a 27 percent drop in various taxes paid by Armenian mining firms. They totaled 16.7 billion drams ($41.2 million) in various taxes in January-September 2012.

Former Prime Minister Hrant Bagratian, who is now a parliament deputy from the opposition Armenian National Congress (HAK), dismissed this explanation, accusing the industry of grossly underreporting its production levels. “The real turnover in the mining and metallurgical industry is $2 billion,” he claimed on Tuesday.

Bagratian also denounced tax rates and methodologies applied by the Armenian government to the industry. “If this was, for example, Libya, $1.5 billion of that $2 billion would go to the state budget. In Armenia the budget gets only $30 million,” he told RFE/RL’s Armenian service (Azatutyun.am).

Opposition politicians and some economists have long suggested that mining is a major source of tax evasion in Armenia.

“The mining sector is rather undertaxed in Armenia,” Aristomene Varoudakis, a senior World Bank official said in 2010. “Taxation regime in the Armenian mining sector is way below the international best standards.” Varoudakis said the Armenian government has pledged to remedy the situation with major changes in laws regulating the work of mining companies.

The Armenian parliament adopted a government-drafted special Mining Code in June last year. Movsisian told the National Assembly then that the code will lead to more tax revenues and capital investments in the sector.

The code was criticized by the opposition and environment protection groups, however. The latter have long accused local mining plants of operating in utter disregard of safety norms and environmental standards.

The largest of those enterprises, the Zangezur Copper-Molybdenum Combine (ZCMC), was the country’s second leading corporate taxpayer in January-September. The German metals group Cronimet holds a controlling stake in the ZCMC.
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