The State Revenue Committee (SRC) said on Thursday that it will likely bring more tax evasion charges against Armenia’s leading food producing and exporting company whose official owner, Davit Ghazarian, was arrested earlier this week.
The SRC chief, Davit Ananian, also made clear that the Spayka’s company’s resulting financial troubles, which could adversely affect thousands of Armenian farmers, will not deter tax authorities from pressing the charges.
The SRC said last Friday that the Spayka company evaded over 7 billion drams ($14.4 million) in taxes in 2015 and early 2016. The accusations stem from large quantities of foodstuffs which were imported to Armenia by another company, Greenproduct. The SRC claims that Greenproduct is controlled by Spayka and that the latter rigged its customs documents to pay fewer taxes from those imports.
Ghazarian was quick to strongly deny any ownership links to Greenproduct. He said the SRC moved to arrest him after he refused to pay the alleged back taxes. The businessman was taken into custody on Monday amid street protests staged by hundreds of his employees.
Ananian said that the SRC is now scrutinizing Spayka’s operations in 2016-2018 and will likely impose fresh tax penalties on the company. “I think [the 7 billion-dram fine] will rise because we have a seemingly criminal conduct that happened during a three-and-a-half year period and we have so far processed documents and done calculations covering … only around 30 percent of that period,” he told reporters.
Prime Minister Nikol Pashinian said that Spayka could be ordered to pay as much as 30 billion drams ($62 million) when he strongly defended the tax fraud case on Tuesday. He said investigators may also implicate the arrested businessman in a broader “chain of machinations” involving “the highest echelons” of Armenia’s former government.
Some Armenian media outlets have for years alleged that former President Robert Kocharian or his successor Serzh Sarkisian’s son-in-law, Mikael Minasian, hold a major stake in Spayka. Ghazarian again insisted three days before his arrest that he is the company’s sole owner.
Spayka was set up in 2001 and currently employs about 2,000 people. It is Armenia’s largest producer and exporter of agricultural products grown at its own greenhouses or purchased from farmers in about 80 communities across the country. The company also owns hundreds of heavy trucks transporting those products abroad and Russia in particular.
In a series of statements issued in recent days, Spayka warned that it may not be able to buy large quantities of agricultural produce from farmers this year because of what it regards as unfair and baseless tax evasion charges.
“We are facing very serious problems,” Spayka’s acting chief executive, Karen Baghdasarian, told RFE/RL’s Armenian service on Wednesday. “Several foreign banks have started a process of freezing or withdrawing our loans. We are now trying to slow or stop that process.”
Among Spayka’s foreign creditors is the Manila-based Asian Development Bank (ADB). Last year the ADB lent Spayka $30 million for the construction of more climate-controlled greenhouses equipped with drip irrigation systems.
Spayka also used foreign funding to build a cheese factory in Yerevan. Pashinian was present at its inauguration on March 26.
The prime minister dismissed Spayka’s warnings on Tuesday, expressing confidence that the food giant will continue to buy fruits and vegetable from farmers despite Ghazarian’s arrest.
Armenia’s acting Agriculture Minister Gegham Gevorgian announced on Thursday that the Armenian government is ready to provide financial assistance to other firms that would buy more agricultural produce. But he did not give any numbers.
Ananian argued, for his part, that many farmers’ dependence on Spayka does not mean that the SRC cannot slap heavy fines on the company or prosecute its owner. “Yes, we don’t want to disrupt Spayka’s operations,” said the SRC chief. “But we cannot accept the non-disruption of its operations as a precondition and avoid making a legal evaluation of its leadership’s past behavior.”
Spayka was already fined about 2.5 billion drams ($5 million) for profit tax evasion in July last year. Ghazarian said on April 5 that he agreed to pay the “unfounded” fine in order to have the company’s bank accounts unfrozen.