Taxing Times for Armenians

Friday, August 19, 2005
IWPR
By Naira Melkumian in Yerevan {a freelance journalist in Yerevan }

Big businesses in Armenia pay far less tax than their counterparts in other post-Soviet countries, with the burden of taxation borne by ordinary citizens and small companies, official statistics reveal.
[...]
According to the IMF 2004 report, the country’s biggest businessmen pay only 23 per cent of all taxes while they can potentially contribute 75 per cent.
[...]
After urging from the International Monetary Fund, IMF, the state tax department recently published two lists of the country’s 300 highest taxpayers, which paint an extraordinary picture of the country’s economy that is embarrassing to both government and big business.
[...]
"The tax collection level in Armenia is the lowest among the countries of the CIS," McHugh {the IMF’s representative in Armenia} told IWPR.

Economists say this is because some of the country’s best-known businesses are not paying big tax bills – a fact that although commonly believed in Armenia for many years has now been proved by the publication of the two lists detailing which taxpayers pay what into the treasury.
[...]
Only two big companies, Grand Tobacco and International Masis Tabak, are among the leading taxpayers in the current list.

Grand Tobacco is in fifth position having paid 2.3 billion drams (more than five million US dollars) for the first half of this year or 2.9 per cent of all taxes collected by the tax department.
[...]
There has been criticism for example that Kotaik Beer {71 per cent of which belongs to the French firm Castel}, which dominates 60 per cent of Armenia’s lucrative beer market, has paid no profit tax at all – at the same time as its smaller competitor Yerevan Beer paid 128 million drams (290,0000 dollars).
[...]
Under the law, companies that acquire more than one million dollars of over overseas funds every two years are exempt from such taxation.
[...]
Most of the taxes collected in Armenia are collected indirectly. Parliamentary deputy Victor Dallakian estimated that 80 per cent of revenues come from indirect taxes, while developed economies collect around 70 per cent of their revenue from direct taxes.

According to the finance ministry, 46.2 per cent of tax revenues come from VAT, while profit tax provides only 17.4 per cent, and income tax 8.4 per cent of the budget.

[...]Felix Tsolakian, head of the tax department, told IWPR that over the last two years there has been a 40 per cent increase in the proportion of direct taxes in total tax revenues. [...].

Note: Above are excerpts from the article. The full article appears here. Clarifications and comments by me are contained in {}. Deletions are marked by [...]. The bold emphasis is mine.