By Emil Danielyan
A Russian-owned company operating one of Armenia’s two mobile phone network has become the country’s number one corporate taxpayer, doubling its contributions to the state budget in the first half of this year.
According to the State Tax Service (STS), K-Telecom, the owner of the VivaCell network, paid 15 billion drams ($50 million) in various taxes, sharply up from 7.4 billion drams paid in the first half of 2007.
By contrast, three other major Armenian companies, which previously topped the taxpayer lists regularly published by the STS, each paid approximately 20 percent less in taxes during the same period. One of them, the ARG natural gas distributor, is a distant second it the latest STS rankings with a net contribution of 9.4 billion drams. It is followed by the national telecommunications company ArmenTel (8.2 billion drams) and the Zangezur Copper-Molybdenum Plant (8 billion drams).
K-Telecom’s performance reflects the dramatic expansion of a wireless network that was launched three years ago following the abolition of ArmenTel’s controversial monopoly on mobile telephony. More than two-thirds of an estimated 1.9 million mobile phone users in Armenia are currently subscribed to VivaCell. K-Telecom, which was purchased by Russia’s Mobile TeleSystems for $430 million last year, claims to have attracted 400,000 subscribers between September 2007 and April 2008 alone.
ArmenTel and its Beeline wireless division have been owned by another Russian mobile operator, Vimpelcom, since 2006. ARG and Zangezur are also controlled by foreign investors.
Armenia’s other leading corporate taxpayers include companies importing fuel, basic foodstuffs and cigarettes, tobacco factories, the national electricity distribution and rail networks as well as the nuclear power station at Metsamor.
The Armenian government’s tax revenues soared by 37.4 percent to 226 billion drams ($750 million) in the first five months of 2008. Proceeds from value-added tax accounted for just over half of those revenues and were up by 53 percent in absolute terms. By comparison, corporate profit tax generated only 17.5 percent of the total in what analysts see as an indication of continuing widespread tax evasion in the country.
The Armenian authorities and Prime Minister Tigran Sarkisian in particular have declared improved tax administration and the fight against tax evasion a top priority. In recent months, tax authorities have reportedly stepped up their often controversial financial inspections of local firms suspected of underreporting their revenues.
In the latest anti-fraud measure, the STS on Monday ordered a dozen food supermarkets in Yerevan to suspend their operations for between up to ten days, saying that they evaded taxes by systematically failing to issue cash receipts to buyers. It also issued warnings to 13 other large shops monitored by tax officials. They were found to have committed such violations on a smaller scale.
In a written statement, the STS said the crackdown on tax fraud in retail trade will be “continuous” and urged all businesses to “operate within the framework of law.”