BAGHDASARIAN WOOS SMALL BUSINESS, PLEDGES TAX CUTS
By Ruzanna Stepanian

Radio Liberty, Czech Rep.
Jan 23 2008

Artur Baghdasarian, an opposition leader and major presidential
candidate, sought the backing of Armenia’s small and medium-sized
businesses on Wednesday, denouncing a recent government measure that
will force many of them to pay higher taxes.

In a campaign meeting with several dozen businessmen Baghdasarian
claimed that the very existence of such firms employing tens of
thousands of Armenians is now under threat because of "imprudent tax
policies" pursued by the government. He singled out government-drafted
legal amendments that will make it harder for them to pay only
so-called "simplified tax" and be exempted them from other, heftier
duties.

The amendments were approved by parliament in July and came into
effect this month as part of a government plan to significantly reduce
tax evasion in Armenia. Government officials say they are primarily
directed against medium-sized and large companies that have used legal
loopholes to qualify for simplified tax and thereby pay less taxes.

Only small traders and some service providers will now be eligible
for this preferential form of taxation, which was introduced in the
late 1990s to spur the development of small business in Armenia. The
State Tax Service estimates that the number of local firms covered
by it will shrink from 26,000 to 14,000 as a result.

Baghdasarian claimed that the changes in the Armenian law on simplified
tax will "effectively eliminate small and medium-size businesses." "The
de facto scrapping of simplified tax will hit hard about 30,000
entrepreneurs," he said, adding that if elected president, he will not
only abolish the enacted changes but extend the law to more businesses.

In his election manifesto, Baghdasarian promises to initiate an
across-the-board reduction in the basic tax rates but does not
specify by how much. He remained vague on the subject on Wednesday,
saying only that tax cuts would boost state revenues and result in
thousands of new jobs.

The government policy on simplified tax has also been attacked by
another opposition candidate, former President Levon Ter-Petrosian.

He has claimed that it is part of what he sees as an ongoing
monopolization of the Armenian economy.

Baghdasarian likewise accused the Armenian authorities of favoring
government-connected "oligarchs" who effectively control lucrative
sectors of the economy. "Imports of 21 basic consumer goods are in
the hands of a few monopolists," he said. "What we are seeing is a
monopolization of whole sectors of the Armenian economy. That means
the number of people engaged in small and medium-sized business in
our country will decline drastically."

Meeting with some 60 wealthy entrepreneurs late last month, President
Robert Kocharian denied the existence of de facto economic monopolies
in Armenia, saying there are only companies holding "dominant
positions" in commodity imports and other sectors. He claimed that
other local and foreign firms do not dare to compete with them for
purely "psychological" reasons.