KOCHARIAN AGAIN SLAMS ARMENIAN TAX COLLECTION
By Emil Danielyan

Radio Liberty, Czech Rep.
Dec 8 2006

President Robert Kocharian again lambasted Armenia’s tax and customs
authorities on Friday, saying that the amount of taxes collected
by them remains too low and "does not correspond to the existing
potential."

The criticism came at a special meeting between Kocharian and a group
of top officials, including Prime Minister Andranik Markarian, Finance
Minister Vartan Khachatrian and Central Bank chief Tigran Torosian. The
heads of the State Tax Service (STS) and the State Customs Committee
(SCC) were also in attendance.

"In the president’s words, some work has been done in the past few
years to improve the tax and customs administration, but it is still
far from being satisfactory," Kocharian’s office said in a statement.

The head of state was cited as demanding a "qualitative change" in
the work of his government’s two revenue collection agencies next year.

The Armenian budget for 2007, approved by parliament last week,
calls for an almost 16 percent increase in public spending which is
projected to total a record-high 558.7 billion drams ($1.51 billion).

This will require a corresponding rise in tax revenues, something
which was stressed by Kocharian during the meeting.

According to official data released by the Finance Ministry, the STS
and SCC collected 346 billion drams in combined revenues during the
first ten months of this year. This represents an almost 20 percent
rise from the same period in 2005, putting the government on track
to meet its 2006 budgetary targets.

Despite having grown steadily over the past decade, the tax revenues
are still worth less than 15 percent of Gross Domestic Product,
one of the lowest rates in the former Soviet Union highlighting the
scale of tax evasion in Armenia. Kocharian’s chief economic adviser,
Vahram Nercissiantz, has repeatedly singled out the disproportionately
low figure as a key economic challenge facing the country.

"It is evident that considering our robust economic growth, it should
have been possible to collect much more tax revenues," Nercissiantz
admitted in a RFE/RL interview last June. He said Armenia’s continuing
double-digit economic growth makes the tax shortfall particularly
glaring.

Kocharian was reported to instruct the tax authorities to tackle the
problem by eliminating unspecified legal loopholes for tax avoidance
and creating a level playing field for all Armenian businesses. It
is not clear if he agreed with a widespread perception that wealthy
government-connected entrepreneurs get away with grossly underreporting
their earnings.

The latest list of the country’s 300 largest corporate taxpayers made
public by STS last month shows that many of the so-called "oligarchs"
continue to post modest profits contrasting with their conspicuous
wealth. Gagik Tsarukian, arguably the most influential and ambitious
of them, was again a case in point. The biggest of the companies
known to be owned by him held a lowly 76 place in the STS rankings,
with only 411 million drams ($1.1 million) in taxes and other duties
paid from January through August.