UTILITY FIRMS ARMENIA’S MAIN PENSION CONTRIBUTORS
By Anna Saghabalian
Radio Liberty, Czech Rep.
Dec 12 2007
Social security taxes levied from Armenia’s leading utility companies
are the single largest source of pensions paid to hundreds of thousands
of elderly citizens, a senior government official said on Wednesday.
Vazgen Khachikian, head of the State Social Security Fund, unveiled
the list of the country’s biggest pension taxpayers, which is topped
by the Armenian electricity and natural gas distribution networks as
well as ArmenTel, the national telecommunications company.
Armenia’s moribund state railway is in a surprising fourth place,
paying more to the pension fund than the country’s largest corporate
taxpayer, the Zangezur Copper-Molybdenum Plant. Zangezur is only
sixth on the list made available to RFE/RL by Khachikian.
Other big and lucrative Armenian companies are much lower in the
rankings. The Sanex company, for example, which enjoys a de facto
monopoly on imports of basic food commodities, paid less in social
security taxes than each of the country’s main hospitals.
According to Khachikian, this does not necessarily testify to gross
tax evasion as the main factor in pension tax collection is the
number of people employed by a particular company and the size of
their wages. "We have to keep in mind that it is possible to make
big profits with few employees," he said.
"But this doesn’t mean there are no companies evading social security
and other taxes," Khachikian said, adding that the practice is
particularly widespread among construction companies, restaurants
and numerous taxi firms.
They are believed to artificially reduce their contributions to the
State Social Security Fund by underreporting the number of their
employees. It is also not uncommon for private firms to underreport
their workers’ wages. The practice is thought to be commonplace in
all sectors of the economy.
With the total annual amount of officially declared wages paid in
the private and public sectors estimated at 500 billion drams ($1.65
billion), analysts say the Armenian government should be able to
collect at least 110 billion drams in social security tax this year.
However, the pension fund’s revenues are expected to come in at only
85 billion drams.
In an effort to address the problem, the government decided two years
ago to transfer the authority to collect pension tax from the fund
to the State Tax Service. Khachikian said the move has worked as his
agency rapidly balanced its books and posted a net surplus of more
than 4 billion drams in 2006. The surplus is on course to reach at
least 7 billion drams next year, he said.