ArmRosGazprom (ARG), the Russian-dominated national gas distribution company, has become Armenia’s number one corporate taxpayer despite reporting a sizable drop in its profits last year.
With 18.4 billion drams ($49 million) in various taxes paid in 2009, ARG tops the latest list of the country’s leading taxpayers released by the State Revenue Committee (SRC) this week.
The company, 80 percent of which is owned by Russia’s Gazprom monopoly, posted serious financial losses in 2009 because of a 20 percent fall in natural gas consumption in Armenia. That was clearly the result of the economic recession and an April 2009 surge in the price of natural gas imported from Russia.
The cost of the Russian gas will rise further this April. ARG asked state utility regulators late last month to allow it to adjust its retail tariffs accordingly.
The tax list was previously topped by K-Telecom, another Russian-owned company that runs Armenia’s largest mobile phone network. The company slumped to third place in the SRC’s 2009 rankings because its tax contributions to the state budget shrunk by almost half to about 16 billion drams.
A K-Telecom spokesman blamed it on Thursday on the economic crisis, saying that Armenians have cut back on phone conversations. According to the SRC, K-Telecom was the third largest taxpayer in 2009.
The second position on the list is held by the Alex-Grig company, which controls lucrative imports of wheat, sugar and other basic foodstuffs to Armenia and paid 16.12 billion drams in taxes in 2009. Only 46 millions dram of the total were profit and payroll taxes, raising more questions about the credibility of earnings posted by what is widely seen as one of Armenia’s most lucrative companies. Even so, they were twice higher than the amount of its so-called direct taxes paid in 2008.
Aleks-Grig is owned by Samvel Aleksanian, a parliament deputy and one of the country’s wealthiest men with close ties to the government. It is followed on the SRC list by the ArmenTel national telecommunications company and Armenia’s leading fuel importer, Flash. The SRC collected only 82 million drams worth of direct taxes.
Mushegh Elchian, Flash’s deputy executive director, insisted that the company is not underreporting its revenues. “Every sphere has its specificities,” he told RFE/RL when asked to explain the modest sum.
The top ten taxpayers also include the Armenian distributor of Philip Morris cigarettes. Its fiscal contributions totaled over 6 billion drams in 2009.
The taxpayers’ list is notable for a lack of manufacturing firms. “We are a mostly consumption-based country that lacks manufacturing, and that is why the large taxpayers’ list is topped by either importers or service providers or infrastructure companies,” said Andranik Tevanian, an independent economist. “This suggests that Armenia has yet to develop an export-oriented and manufacturing-friendly economic system.”
Armenia’s 300 largest companies accounted for almost 45 percent of the government’s overall tax revenues in 2009. Prime Minister Tigran Sarkisian has repeatedly pledged to make them the main target of his government’s fight against tax evasion.
According to Tevanian, tax evasion among them remains a serious problem. “There are formal and informal budgets in Armenia,” he said. “The informal ones are probably much higher than what we get to see.”
“As you know, large entrepreneurs are also engaged in politics and all vote falsifications are perpetrated also with their help, their financial resources,” claimed Tevanian. “It may well be that they pay their taxes in full but most of those end up somewhere else.”