By Emil Danielyan
President Robert Kocharian ordered Armenia’s top tax collectors on Tuesday to ensure that businesses controlled by them or their cronies stop evading taxes as he continued his high-profile campaign for fiscal responsibility. In an extraordinary acknowledgement of widespread nepotism and corruption in the collection of state revenues, Kocharian said the State Taxation Service must treat all businesses “equally and fairly.” He told the management of the reputedly corrupt agency that that is essential for tackling endemic tax evasion which economists blame on the slow impact of Armenia’s economic growth on living standards.
“I am sure that if you start from yourself, from taxing your friends and relatives, you will not let others stay beyond the taxation field,” Kocharian said, according to his press office. “Of course, we can not forbid your friends from doing business. On the contrary, we encourage free enterprise. What we don’t encourage is the creation of privileged conditions for anybody.”
Armenian entrepreneurs lacking government connections have long been complaining about the existence of such conditions that have particularly benefited a small group of millionaire businessmen widely described as “oligarchs.” Lucrative firms owned by those businesses often claim to operate at a loss.
Kocharian also admitted that tax officials routinely conduct financial inspections to unjustly penalize companies that are not connected with them or have no powerful government patrons. “My oversight service has established that there are enterprises which have not been inspected for years and those which are inspected several times a year,” he said. The tax authorities must end their “mass attacks” on honest taxpayers and rid them of a “constant fear of inspections,” he added.
Kocharian subjected the management of the Armenian customs service to similarly harsh criticism on Saturday. He accused customs officials of helping large-scale importers avoid taxes in return for kickbacks.
However, the damning indictment did not lead to any high-level staff changes in the two government agencies that collect the bulk of Armenia’s budgetary revenues. Those revenues have steadily increased in recent years, but still make up a very modest share of the country’s Gross Domestic Product.
The problem was highlighted by the International Monetary Fund in an extensive report on the Armenian economy issued last month. The report suggested that the authorities can easily triple the amount of taxes levied from Armenia’s 200 biggest companies. Many of them are owned by government-connected individuals.
Kocharian has warned that the tax and customs inspectorates must boost their revenues in order to ensure a 25 percent increase in public spending envisaged by the 2005 budget. He has also pledged to get tougher on tax-evading businessmen.
(Presidential press service photo)