From: MihranK@aol.com
Subject: Is amnesty of capital possible?

Is amnesty of capital possible?

Yerkir.am
May 05, 2006

One of the main peculiarities of the transition period is the
semi-legal accumulation of capital through shadow processes. It is not
possible to speak about proper accumulation and legal circulation of
capital in a context when massive privatization and decentralization
deals are made and the economic entities have an opportunity to act
under the inadequate supervision of undershaped and weak state
institutions.

What is amnesty?

The experience of many countries shows that the transition periods
have their logical ends when capital accumulated in this or that way
is finally legalized which ensures the further efficient use of such
capital. This is possible when the political elite of the country and
the society at large manage to have a process of capital amnesty. This
allows establishing an atmosphere of mutual trust between the state,
the society and the businesses which will finally become the
cornerstone of social accord in the country.

What does capital amnesty mean and how should it be achieved? Here it
is very important that the society on the one hand (represented by the
voters, the political parties and other institutions of civil society)
and the business community of the other hand realize the importance of
capital amnesty, i.e. disclosing the capital accumulated through
illegal means, mostly through tax evasion.

The main goal of capital amnesty is to mobilize additional resources
for the operation of the economic system especially through returning
financial and material resources transferred abroad. Of course, it is
very difficult to estimate the volume of such resources. However,
there is no doubt that we are speaking about significantly large
amounts that could be used to create a significant number of jobs in
the country.

Of course, it will sound naive to think that all illegally accumulated
financial resources transferred abroad could be returned. A
significant portion of such resources have `emigrated’ from the
country together with people who invested their money in real estate,
stocks, businesses. Some share of ` emigrated’ capital has been
returned in the form of `foreign’ investments. Such ` foreign’
investments are in reality Armenian investments coming from abroad
because in this way the investors can conceal the shadow or often even
criminal sources of their money on the one hand, and enjoy profit tax
privileges envisaged for foreign investments on the other.

So we can see that the so-called `foreign investments’, at least
partly, are a process of legalization and return of money illegally
accumulated in Armenia and transferred to foreign banks. In other
words, this is another way of capital amnesty that has been
institutionalized (through laws or various certification processes,
etc.).

It is very important for capital or tax amnesty that the secrecy of
any information made available to the state should be ensured. Such
information can be transferred by financial brokers. Guarantees should
be given that the tax or law enforcement agencies will not start
investigations to check the legality of the capital.

By Mher Ohanian