Transparent business: more taxes due to list circulated by State Tax Service

Yerkir/arm
May 13, 2005

Information on the largest tax payers and the amounts of taxes paid
by them was recently made public by the State Tax Service. According
to this list, 300 largest tax payers have paid more than 27 billion
drams in taxes during the first quarter of 2005. The total taxes
paid amounted to 35 billion drams; if customs taxes are added to this
amount the overall tax payments amount to 61 billion drams.

Irrespective of the quantitative content of the tax payers list, the
very fact that it was made public is in itself a positive initiative
especially that it was made public as required by law. The implication
is that this was not a one time initiative and information on the
largest tax payers will be publicized regularly.

When information on taxes covering longer periods is publicized then
maybe more comprehensive information will be available to the public
regarding the taxes really paid or hidden by the large tax payers.
Nevertheless, the present list of tax payers gives an indirect picture
of the tax rating of this or that company and its potential future
tax payments.

Only the first 9 companies have paid taxes of more than 1 million
dollars in the first quarter while the last 200 companies on the list
paid less than 20,000 dollars of profit tax each. In other words,
the list reflects a large portion of shadow economy.

Judging from the taxes paid, we can see that the majority of the
companies working on the Armenian market do not care much about their
reputation. The most important thing for them is to gain profits,
of course taking an advantage of the existing gaps in the legislation.

For instance, companies working in such important spheres as
construction, transportation, international transportation, production
of non-alcoholic beverages and mineral water, partially also companies
working in the sphere of production and import of cigarettes have
shown very modest profits and have paid taxes accordingly.

Some large companies take advantage of the gaps in the existing
legislation and register off-shore companies thus avoiding paying
profit taxes.

However, filling in those gaps in the legislation is a matter of
time. The list of the largest 300 tax payers will be sorted out
with time and the top 100 “golden tax payers” will be pointed out.
The administrative resources of the State Tax Service will be directed
at the entities working in the shadow economy.

Meanwhile, let’s see how the large tax payers have been distributed
at the top of the tax payers’ list. The largest tax payer is the
copper-molybdenum factory in Zangezur: it leads the list both in
terms of the total amount of taxes paid (5.8 billion drams) and in
terms of profit tax (1.5 billion drams) and VAT (3.8 billion drams).

The monopolists in the energy and communications sectors, ArmRusGasArd
and ArmenTel follow the copper factory with tax payments of 3.1 and
2.1 billion drams respectively. Electricity distribution networks have
paid taxes of 1.4 billion drams; the nuclear power plant has paid
955 million drams in taxes. Hrant Vardanian’s Grand Tobacco Company
has paid 3.5 million drams in taxes in the first quarter of 2005.