The move is the latest in a series of government measures aimed at tackling widespread tax fraud and, in particular, underreporting of earnings by Armenia’s largest corporate taxpayers. It stems from government-drafted amendments to Armenian tax legislation that were approved by parliament last fall.
The initial version of those amendments submitted to the National Assembly in May 2009 met with fierce resistance from pro-government lawmakers with extensive business interests. They strongly objected to provisions giving officials from the State Revenue Committee (SRC) unrestricted access to large companies’ facilities, financial documents and other information about their business operations.
The government pushed the bill through parliament only after limiting the powers of SRC representatives. In particular, they will not be allowed to enter and inspect production facilities at will.
In a statement issued after a meeting held in the eastern town of Gavar, the government said the approved list mostly comprises Armenia’s leading importers of basic foodstuffs, alcohol, cigarettes and drugs. They have long posted suspiciously modest profits contrasting with the conspicuous wealth of their owners, many of them government-linked businessmen.
According to the government statement, tax agents will also be assigned to local cigarette-manufacturing companies. But neither the statement, nor senior SRC officials, who spoke to journalists after the cabinet meeting, publicized the full list, which is subject to annual review.
“Unfortunately, I don’t have a copy with me right now,” said Ruben Kocharian, the deputy head of the SRC. He said all 24 entities have posted annual sales exceeding 4 billion drams ($11 million) and/or quarterly imports worth over 500 million drams.
Kocharian insisted that tax representatives will help his agency ascertain the actual volume of profits made by those firms. “The same mechanism was applied in other countries and produced quite good results,” he told a news conference.
But Arsen Ghazarian, chairman of the Armenian Union of Industrialists and Entrepreneurs, sounded a more cautious note. “If tax representatives perform their functions diligently and have normal businesslike relationships with entrepreneurs … we will be able to say that this mechanism has proved effective,” he told RFE/RL’s Armenian service. “Time will tell.”
Prime Minister Tigran Sarkisian has repeatedly described big business as “the number one target” of his government’s fight against tax evasion. He pledged to toughen the crackdown in April, acknowledging that government measures taken so far have proved largely ineffective.
As part of that crackdown, some 285 Armenian-based companies with an annual revenue of over 1 billion drams must have their financial reports filed with tax authorities certified by independent auditors starting from this year.