The Armenian government is facing fresh corruption allegations by its critics after granting a significant tax benefit to an agricultural company that was recently set up by President Serzh Sarkisian’s chief adviser.
The official, Aram Gharibian, and his brother Abel registered the company called Armyanski Urozhay in February with the stated aim of opening greenhouses on 11 hectares of land in
Armenia’s central Kotayk province. They asked the government to defer until 2017 the collection of a 20 percent value-added tax (VAT) from 3.7 billion drams ($8.7 million) worth of imported industrial equipment which they said will be installed at the farming facilities.
The government, which is legally allowed to grant such tax deferrals on a case-by-case basis, accepted the request on May 29. It instructed the Economy Ministry to monitor Armyanski Urozhay’s operations and ensure that the company achieves the objectives spelled out in its 6.5 billion-dram investment plan.
Speaking to journalists on Wednesday, Gharibian denied any conflict of interest in the creation of the company and the tax advantage secured by it. He claimed that he cannot be deemed illegally engaged in entrepreneurial activity because he has authorized another entity to manage his 20 percent share in Armyanski Urozhay. The rest of the company is formally owned by his brother.
Economy Minister Karen Chshmaritian similarly dismissed suggestions that the little-known firm with no track record in agribusiness was allowed to delay the payment of the 738 million-dram ($1.8 million) tax primarily because it is controlled by the senior official from the presidential administration. “I don’t care who owns it” he told reporters. “What I care about is good business.”
Opposition politicians and other government critics are unconvinced. “If it wasn’t for that person I’m not sure the government would have given such a privilege to that company,” said Vahagn Khachatrian, a prominent economist affiliated with the opposition Armenian National Congress (HAK). He called the government’s decision a “classic example of corruption.”
Khachatrian said that the tax break could give the new agribusiness firm an unfair advantage over other, established and smaller greenhouses. “A lack of competition is the main problem in Armenia. The economy doesn’t develop because of that,” Khachatrian told RFE/RL’s Armenian service (Azatutyun.am).
The oppositionist also claimed that the VAT deferral makes mockery of the recently appointed Prime Minister Hovik Abrahamian’s pledges to create “equal conditions” for all businesses. “This only proves that if you want to do business in Armenia you need government connections,” he said.
Many senior government and law-enforcement officials in Armenia are believed to own lucrative businesses, either directly or through their relatives or cronies.