GERMAN-OWNED MINING GIANT REMAINS ARMENIA’S TOP TAXPAYER
By Emil Danielyan
Radio Liberty, Czech Rep.
Nov 2 2006
A German-owned company mining copper and molybdenum remains Armenia’s
largest corporate taxpayer, having contributed 22.7 billion drams
($60 million) to the state treasury during the first nine months of
this year, official statistics show.
The Zangezur Copper and Molybdenum Combine continues to be followed
by two other foreign-owned companies, the ArmenTel telecommunications
operator and the ArmRosGazprom natural gas distributor. According
to the figures provided to RFE/RL by Armenian tax authorities, they
have paid 13 billion drams and 8.3 billion drams respectively during
the same period.
Also high on the official list of the country’s 300 largest taxpayers
are two fuel importing companies, two tobacco firms, the national power
utility, a mobile phone operator, the Metsamor nuclear power plant,
the Zvartnots international airport, a brandy distillery and even a
car dealership. But the amount of various taxes and customs duties
paid by each of them pales in comparison with Zangezur’s contribution
to Armenia’s national budget.
The mining giant is based in the southeastern town of Kajaran and
employs thousands of people. It was privatized in December 2004 for
$132 million by a consortium of local and foreign investors led by
the German metals group Cronimet. The latter owns 75 percent of the
company, both directly and through its Yerevan-based Makur Yerkat
smelter.
The Armenian government is on track to increase its still modest tax
and customs revenues by 20 percent to 375 billion drams (almost $1
billion) this year. It will need to achieve a similar increase next
year in order to successfully implement its 2008 budget projected to
be worth about $1.5 billion.
At the urging of the World Bank and other Western donors, the
government began publicizing two years ago the list of the top
taxpayers as part of its declared crackdown on endemic tax evasion.
It was hoped that the "name-and-shame" policy will embarrass the
country’s wealthiest citizens that are believed to grossly underreport
their earnings. Government officials and some donors say that this
measure alone has forced them to pay more taxes.
The head of the State Tax Service (STS), Felix Tsolakian, insisted
this week that no Armenian company is now off limits to tax
inspectors. "Today tax inspectors have no trouble entering one or
another business," Tsolakian told RFE/RL in an interview.
Still, the latest rankings released by his agency show that many of
Armenia’s government-connected tycoons continue to post modest profits
contrasting with their conspicuous wealth. Gagik Tsarukian, arguably
the most influential and ambitious of the so-called "oligarchs," is
a case in point. The biggest of the companies that are known to be
owned by him, Multi-Leon, occupies a lowly 76 place in the STS list,
with only 411 million drams ($1.1 million) in taxes and other duties
paid from January through August.
Another Tsarukian-controlled business, a big cement factory located
in the southern town of Ararat, paid 248 million drams, or even less
than Yerevan State University. The factory is thought to be operating
at full capacity thanks to Armenia’s construction boom and growing
cement exports to neighboring Iran and Georgia.
The modest taxes sharply contrast with sums spent by Tsarukian on
the ongoing massive distribution of wheat, potato seeds and other
agricultural aid to thousands of farmers across the country reeling
from last summer’s severe drought. The aid, heavily advertised by
Tsarukian-funded media, is being handed out under the aegis of his
Prosperous Armenia party that intends to do well in next year’s
parliamentary elections. Some leaders of Armenia’s mainstream
opposition parties have already denounced it as a large-scale vote
buying operation.