By Shakeh AvoyanAn Armenian pressure group representing hundreds of small and medium-sized businesses claimed on Monday that they continue to be harassed by tax authorities and dismissed government assurances that the business environment in Armenia is improving.
The Union of Traders which comprises more than 700 small entrepreneurs from across the country singled out what it said is a continuing widespread extortion of advance payments by tax officers. The problem was the main theme of the union’s annual conference in Yerevan.
Under Armenian law, the authorities can not force businesses to pay profit and other taxes in advance of their operating revenues. The provision is often violated in practice.
“They used to visit me once a month [to demand an advance],” said Tsolvard Gevorgian, the union’s chairwoman who also owns a business. “Now they come three times a month.”
Gevorgian and other members of the organization complained that officials from the State Taxation Service are trying to meet their revenue targets at any cost, including blackmail.
The Armenian government collected a total of 106 billion drams ($182 million) in various taxes last year or 26 percent more than in 2001 -- its highest ever year-on-year increase in tax revenues. The government plans to increase the figure further by 20 percent this year. Its chief taxman, Yervand Zakharian, attributes the improved tax collection to a more efficient work of his agency and a crackdown on the shadow economy.
But members of the Union of Trades claim that the government itself resorts to illegal practices in dealing with corporate taxpayers. Rafael Shoghunts, owner of a coffee packaging firm in Yerevan, said although his business turnover shrank last year he was told to pay as much profit taxes as he did in 2001. “They are telling me to change figures in my financial statements so that I pay more taxes,” Shoghunts told RFE/RL.
A businessman from the nearby town of Ashtarak, Artur Danielian, said it does not make sense for people like him to complain to the tax agency officials in Yerevan because “the higher their rank, the more they charge.”
A shop owner from Gyumri, Hovannes Vazigeghtsian, said: “A tax inspector may just come in without a warning and say, ‘You know, you have to pay a particular sum to the state budget or you will be fined’.”
Small entrepreneurs admit privately that they avoid legal action and other forms of protest against the government because they often evade taxes to stay afloat. They say it is virtually impossible to make profits and abide by all tax laws. Many are therefore worried about the recent creation of a special tax police that will have the authority to arrest and prosecute tax evaders.
According to official figures, small and medium-sized enterprises account for 38 percent of Armenia’s Gross Domestic Product and generated much of last year’s record-high economic growth of 12.5 percent. About 4,000 new such entities were registered in 2002.
Last November, the government approved a $500,000 plan to support their development in 2003 with free legal counseling and credit guarantees. President Robert Kocharian also pledged to boost the sector at a recent meeting with leaders of another association of small businesses.
However, Gevorgian and other Union of Traders activists dismissed the authorities’ pledges as a gimmick, saying that recent amendments in Armenia’s tax legislation will make their plight even more difficult.