By Atom Markarian
The government is pushing for tougher penalties, including much longer jail terms, against widespread tax evasion in Armenia as part of its efforts to ensure a sizable increase in tax revenues envisaged by its budget for this year.
Under relevant amendments to the Criminal Code to be debated by the Armenian parliament soon, business people convicted of hiding or underreporting their earnings would risk between three and seven years’ imprisonment. The maximum punishment for such crimes now is a two-year prison sentence.
The existing code also stipulates that individual taxpayers can be jailed for up to two months only if they cheat the taxman for than once. The proposed amendments would extend that limit to 12 months. They also call for heavier fines for tax-related offences.
The draft amendments were approved by ministers last month at the start of a government crackdown on tax fraud which followed President Robert Kocharian’s high-profile meetings with tax and customs officials as well as Armenia’s leading entrepreneurs. Kocharian warned the latter that they will no longer get away with evading taxes. He also said that the tax authorities must stop giving privileged treatment to companies owned by their cronies.
Proceeds from the collection of taxes and import duties are projected to grow by about 25 percent to 307 billion drams ($650 million) this year. The government plans a corresponding increase in its spending on education, healthcare, social services and defense.
The proposed toughening of punishment for tax evasion reflects the views expressed by Armenia’s influential Prosecutor-General Aghvan Hovsepian. Speaking to journalists last July, Hovsepian said that the existing sanctions are “absurdly soft” and that his agency will ask the government to revise them.
But at least some of dozens of wealthy pro-government businessmen that hold seats in the National Assembly are opposed to the changes, saying that those could stifle economic activity and be abused by law-enforcement agencies.
“As a rule, when we give the Armenian government new powers that are meant to be used for some good things, we end up disappointed with their actual enforcement,” said Gurgen Arsenian, a businessman who leads the small United Labor Party represented in parliament.
Another pro-establishment lawmaker, Mkrtich Minasian of the People’s Deputy group, said the authorities should instead make sure that the existing law is implemented fairly and consistently. “If the law is fully enforced against not only small- and medium-sized businesses but also big ones, it will help to shrink the shadow sector of the economy,” he said.
No major Armenian businessman has been imprisoned for tax fraud so far.