By Ruzanna Stepanian
Artur Baghdasarian, an opposition leader and major presidential candidate, sought the backing of Armenia’s small and medium-sized businesses on Wednesday, denouncing a recent government measure that will force many of them to pay higher taxes.
In a campaign meeting with several dozen businessmen Baghdasarian claimed that the very existence of such firms employing tens of thousands of Armenians is now under threat because of “imprudent tax policies” pursued by the government. He singled out government-drafted legal amendments that will make it harder for them to pay only so-called “simplified tax” and be exempted them from other, heftier duties.
The amendments were approved by parliament in July and came into effect this month as part of a government plan to significantly reduce tax evasion in Armenia. Government officials say they are primarily directed against medium-sized and large companies that have used legal loopholes to qualify for simplified tax and thereby pay less taxes.
Only small traders and some service providers will now be eligible for this preferential form of taxation, which was introduced in the late 1990s to spur the development of small business in Armenia. The State Tax Service estimates that the number of local firms covered by it will shrink from 26,000 to 14,000 as a result.
Baghdasarian claimed that the changes in the Armenian law on simplified tax will “effectively eliminate small and medium-size businesses.” “The de facto scrapping of simplified tax will hit hard about 30,000 entrepreneurs,” he said, adding that if elected president, he will not only abolish the enacted changes but extend the law to more businesses.
In his election manifesto, Baghdasarian promises to initiate an across-the-board reduction in the basic tax rates but does not specify by how much. He remained vague on the subject on Wednesday, saying only that tax cuts would boost state revenues and result in thousands of new jobs.
The government policy on simplified tax has also been attacked by another opposition candidate, former President Levon Ter-Petrosian. He has claimed that it is part of what he sees as an ongoing monopolization of the Armenian economy.
Baghdasarian likewise accused the Armenian authorities of favoring government-connected “oligarchs” who effectively control lucrative sectors of the economy. “Imports of 21 basic consumer goods are in the hands of a few monopolists,” he said. “What we are seeing is a monopolization of whole sectors of the Armenian economy. That means the number of people engaged in small and medium-sized business in our country will decline drastically.”
Meeting with some 60 wealthy entrepreneurs late last month, President Robert Kocharian denied the existence of de facto economic monopolies in Armenia, saying there are only companies holding “dominant positions” in commodity imports and other sectors. He claimed that other local and foreign firms do not dare to compete with them for purely “psychological” reasons.