The Armenian government on Thursday gave the country’s leading businesspeople until July 1 to stop evading taxes and abusing their market positions or face a tougher crackdown by tax authorities.
Prime Minister Hovik Abrahamian set the deadline the day after meeting more than 100 wealthy entrepreneurs to discuss economic policies of his newly formed cabinet.
“We agreed that everyone must operate on an equal footing and do everything to come out of the shadow,” he said at a cabinet meeting. “That was our condition. We will give them until July 1 to willingly try to work in equal conditions.”
Abrahamian added that he instructed Finance Minister Gagik Khachatrian, who also runs Armenia’s tax and customs services, to monitor their compliance with the reported deal. Their failure to honor it would lead the government to “use our levers to solve the tasks set by us,” he warned.
Abrahamian did not specify punitive measures that would be taken against major companies suspected of tax fraud. Nor did he clarify whether the government wants to collect more taxes than are projected by the Armenian state budget for this year. The tax authorities were on track to meet the 2014 revenue target before the announcement of his plans to reduce tax evasion.
Improved tax administration was a top declared priority of the previous government headed by Prime Minister Tigran Sarkisian. Armenia’s tax revenues have risen significantly in absolute terms in the past several years. But they remain modest as a share of Gross Domestic Product, suggesting that many businesses continue to underreport their earnings.
Analysts believe that tax evasion is especially serious among wealthy entrepreneurs close to the ruling establishment. Many of them have long used their government connections to neutralize competitors and maximize profits. Abrahamian himself has expanded his and his family’s business assets while holding senior positions in the local and central governments for almost two decades.
In a November 2011 speech, President Serzh Sarkisian declared that “business must be consistently separated from the state system.” Government connections remain essential, however, for engaging in some forms of lucrative entrepreneurial activity in Armenia.