Government Could Drop Controversial Tax Measure

Under a government bill submitted to parliament in May, permanent “representatives” of the State Revenue Committee (SRC) would enjoy unrestricted access to companies’ facilities, financial documents and other information about their business operations.

The bill met with fierce resistance from not only the opposition minority but many pro-government members of the National Assembly with extensive business interests. They said it would only create more breeding ground for the already widespread corruption among tax officials.

The strong opposition led the government to shelve the package of corresponding amendments to Armenia’s tax legislation in late June. In an interview with RFE/RL, Armen Alaverdian, a deputy head of the SRC, said that it could significantly amend the controversial package before re-introducing it to the assembly next month.

“I don’t exclude that the provision about the physical presence of tax agents will be replaced by another variant of oversight which can be called an information oversight,” Alaverdian said. In that case, he said, large companies would instead be required to present the SRC with more detailed information about their turnover and financial operations.

Tatul Manaserian, a well-known economist and adviser to parliament speaker Hovik Abrahamian, likewise asserted that the government will likely remove the controversial measure from the tax bill. Manaserian said the SRC should come up with other methods of cracking down on widespread tax evasion among large firms.

“We have still not managed to tax big business [in full,]” he told RFE/RL. “For the most part, big business keeps refusing to disclose proper documents. This means evading taxes.”

Prime Minister Tigran Sarkisian pledged earlier this year to make large and lucrative firms "the number one target" of his government’s ongoing crackdown on tax fraud. Many of them are owned by wealthy individuals with close ties to the government.

The crackdown has become all the more important now that the government is struggling to execute its budget for this year amid Armenia’s worst economic recession since the early 1990s. The SCR collected 233 billion drams ($630 million) in various taxes and duties in the first half of 2009, down by 18.2 percent year on year.

Alaverdian predicted that the tax revenue shortfall will ease in the second half of the year. “I am convinced that we will have an increase in tax revenues in the second half,” he said. “Our July figures testify to that.”