The information concerning cars was very interesting and there was a contradiction between the provided number of imported new cars in Armenia and that number provided by the taxation services (it wrote that in 2005 Armenia imported 552 cars).
The commission assumed that businesses imported cars not by registering at their companies, but by registering at the names of physical persons, which their services don’t cover and don’t have information from them. There were different opinions concerning that contradiction, even a newspaper published information saying that some companies that imported cars were accused of fraudulence. The problem is that businesses have to pay money, including income taxes for importing and selling cars. As for physical persons, they are free of taxes. Is this considered fraudulence or not? In fact, businesses don’t violate any laws. As we were informed by the press-secretary of PSRC, Armine Udumyan, there has been nothing written in the presses concerning any facts of fraudulence, otherwise the prosecutor’s office would have started investigating those cases. As for the commission, they have just registered that the official capacities of imported cars in Armenia are not true and they should conduct one more research in the market.
The commission has found out that “Armenia Lada” and “Karkom Auto” companies importing new Russian cars to Armenia occupy over 95% of the whole market capacity of new Russian cars in Armenia and appear to be one group of persons. This is not a violation either, it would be a violation of the law if those companies used their privileged positions for monopolistic purposes. We were also informed from the PSRC that “Muran”, “Karkomauto”, “Fora” and “Armenia Lada” companies are a common group of people too.
We understand that this estimation is not something new in our market. You can find the same name (Ashot Shahmuradyan) in the director’s title of all these companies in yellow pages of Armenia. This means that the mentioned companies don’t keep the fact that they are a group of persons a secret and there is nothing illegal here.
In spite of everything, the information saying that those 43 companies that import new cars to Armenia imported only 552 cars in Armenia in 2005 is really funny. We have written about this issue too and noted that last year Armenia imported 161 cars with prices exceeding $40k. If you don’t believe this, first of all you should be suspicious about the customs services, because this is the one organization responsible for fixing the prices for those cars in customs registers.
The statistical information is very interesting. Even though Russian cars are cheaper and are free of 10% value added tax, Armenians prefer foreign production cars. Last year Armenia imported 16.500 cars, 10.500 out of which were not made in Russia.
This year the situation has changed. In the beginning of 2006, Armenia imported 11.230 cars, 7190 out of which were foreign cars. This year this number will be much more than that of last year. If we draw that growth mark in percentage, it will consist of two figures.
There is a strange tendency; along with the increase of car import capacities and fall of USD prices the prices of cars are growing. Logically those prices had to go down, but people working at the car markets assure that those prices have gone up by 15% compared to the prices of last year.
Car importing companies pay more taxes now. One more interesting fact; about two years ago the tax services of Armenia published a list of companies that paid over 50 million dram in taxes during the fiscal year of 2005. The list was not so long; there were only 62 companies in that list. Only two car importing companies were included in that list; “Karkomauto” (31st place, 83.600.000 dram) and “Armenia Lada” (34th place, 83.236.000 dram).
As we have noted above, these two companies together occupy 95% of the whole market of Russian new cars imported to Armenia. We can make a simple calculation. According top the information of the RA commission on competition protection, in 2005 the number of Russian new cars sold in the Armenian market covered 4378. 95% out of that share is covered by the mentioned two companies, i.e. in 2005 they sold 4160 cars. These two companies together paid 169.8 million dram income tax to the budget last year. According to the official statistical information, the median price of USD in 2005 covered 457.69. This sum is equal to $371k. Taking into account the fact that income tax is 20% we may calculate that the income of those two companies in 2005 covered $1.855.000 (371.000 x 5). This means that they had $450 profit per car.
Car market workers say that this figure is logical. It is worth mentioning that besides Russian cars, these companies sell foreign cars and handle different technical and other services as well. This means that they have less than $450 profit per car. This calculation is approximate.
We can make other calculations as well. If we take the customs price of Russian new cars equal to $7000, in 2005 these two companies together had to pay $5.8 million to the state budget (20% VAT per car ($1.400) multiplied to 4160 cars). According to the tax payers’ list of 2005 these two companies paid 2.7 billion dram taxes to the budget, which is equal to $5.9 million. In other words, there are no errors in the official information. In other words, the publication of the PRSC should not be considered startling and we should not accuse those companies of fraudulence. On the one hand, we can’t be sure that all those companies work in a duly manner and pay all their duties and taxes. On the other hand, we shouldn’t blame separate companies because the entire system is in that situation, otherwise if they pay all the taxes and work in a duly manner they may go bankrupt very soon. Alas, honesty is not profitable in Armenia.
P.S. By the way, it would be interesting to discuss the publication concerning the monopolistic position of the railway; especially those who travel to Batumi by train would read it with interest.