President Serzh Sarkisian warned Armenia’s leading entrepreneurs on Thursday against evading taxes and obstructing competition in major sectors of the domestic economy dominated by them.
Sarkisian also said that the Armenian government has stepped up its efforts to “drastically improve” the country problematic business environment that hampers faster economic growth.
“It is unacceptable when an entrepreneur spends a lot of time thinking about and developing mechanisms for avoiding taxes or abuses his dominant positions in markets in order to make excessive profits,” he told members of the Armenian Chamber of Commerce and Industry, a private business association. “Particularly incomprehensible is such conduct by large economic entities that already have an advantage [over competitors] thanks to their size and turnover.”
“Unpaid taxes is money stolen from our education and healthcare sectors and, therefore, a blow to the future of our people. One has to realize that in the long run that is also a blow to the future of those enterprises,” he warned.
Sarkisian did not name any of the tycoons posting suspiciously low earnings and paying modest taxes, something which economists say is a key cause of widespread tax evasion in the country.
The government and the reformist Prime Minister Tigran Sarkisian (no relation) in particular have repeatedly described improved tax administration as a top economic priority. However, a range of legislative and administrative measures taken by the government has not addressed the problem radically so far. A senior official from the International Monetary Fund said last month that tax collection in Armenia remains “appallingly” poor.
The authorities have pledged to do more to curb tax fraud and improve the country’s overall investment climate this year -- a fact emphasized by President Sarkisian.
Skeptics argue, however, that virtually all wealthy businesspeople suspected of evading taxes have close ties with the government that has allowed them to effectively monopolize lucrative forms of business. Sarkisian and his predecessor Robert Kocharian have long been accused by his critics of ensuring their privileged treatment by tax authorities and anti-trust bodies.
Many of these so-called “oligarchs” control lucrative imports of foodstuffs, fuel and other commodities to Armenia. The government has given no indication yet that it will seek to break up these de facto monopolies.
In his speech at the Chamber of Commerce, Sarkisian urged the leading importers to set up manufacturing firms and thus create more jobs. “Promotion of domestic manufacturing is the primary goal of our activities,” he said. “Of course, that kind of business activity is much more cumbersome. But we are not lazy people.”
The Armenian president already made such an appeal when he met with a group of businessmen involved in import and shipping operations in February 2009. He promised to create “exceptional opportunities” for them.
One of the importers, Samvel Aleksanian, finished last year the construction of a sugar plant in the northwestern Shirak province, which began in 2007. Aleksanian’s Alex-Grig company, one of Armenia’s largest corporate taxpayers, claims to have invested about $100 million in a facility that should end the country’s heavy dependence on sugar imports.
Alex-Grig and other offshore-registered firms belonging to Aleksanian have accounted for the bulk of those imports since the late 1990s.