The government has initiated a bill to appoint representatives in separate business companies. Specifically, what the government wants to do is amending the law on tax collection in a manner enabling the taxation department to appoint tax inspectors in business companies to control their activities for the purpose of tax collection.
According to the mentioned amendment, the taxation department will have the right to have a representative during 3-6 months in those companies, which had more than 4 billion dram income in the previous year, or which had reported 50 million loss during two years. In fact, the state has established its right to suspect by law. Certainly they may be something suspicious if a company has reported about 50 million loss continuously during two years. Furthermore, how can they leave such big money without control if any company affords to have over 4 million profit (according to our information, the taxation department has already sent its representatives to certain companies)? If this bill is approved, the taxation department may have representatives in almost all major companies. By the way, the government is trying to use this nuance for the purpose of demonstrating a positive environment around this issue. Deputy chief of the taxation department Armen Alaverdyan said in the parliament that the mentioned amendments concerned big businesses only. Furthermore, prime minister Tigran Sargsyan has numerously announced that their target is the big companies too. Many people welcome the idea of pressing on big businesses, but in fact it contains a danger. The tangible fact that we should pay attention to is that the target is not the businesses under shadow but businesses generally. The word “target” is frustrating itself because no one likes to be suspected or targeted by anyone. No one wants anyone to watch his activities. Even factory workers will not be able to concentrate on their work if someone attentively watches what they are doing, especially if this person is from the tax collection body. In addition, there is no guarantee that the relevant tax inspectors will not take information out of companies and tell confidential information to other competitors. In a word, this is not the best method to keep the big business under control. Is it so essential in this phase? If yes, we wander why.
Throughout my experience my impression has always been that the leaders and chiefs of taxation bodies know everything about the business environment and are informed well. They know everything about everyone. By saying “everything about everyone” I don’t mean the incomes only, but their umbrellas and whose businesses are supported by high rank officials. They know everything perfectly but in many cases they cannot do anything. However they have always shown their discontent concerning the fact that officials call them and ask not to touch their friends and businesses, but the next day criticize the activities of their departments. I believe that the taxation department officials and inspectors agree with me. In this case the purpose why they are sending their agents to major businesses is not clear at all.
People are true to say that currently the taxation department can do more based on the law than in fact it is doing. Who said that only long steps can bring to positive results? What does prevent them from starting it from ordinary taxation inspectors who are answering the questions of taxpayers with discontent and ignore them only because of the fact that they have interrupted their ball game on the computer…? Or, don’t the chiefs of regional taxation departments know that not far from their offices there are companies that are working for them? For example, in order to issue one page of information, which should be given to citizens without charge, they are sending them to another office nearby, where citizens are offered to buy the same piece of paper and pay 1000 dram. These are small details, but details which are influencing on the overall environment, businesses and taxpayers.
Every year the World Bank publishes a very interesting report entitled Doing Business. This report estimates the level of adequate conditions for doing business in 181 countries. One of the criteria for estimation is the situation with tax collection. Thus, in 2009 Armenia was in the 150th place among 181 countries in the WB’s Doing Business report (in the previous year it was in the 147th place). According to the report, in Armenia generally businessmen make about 50 payments to the taxation services. For comparison, in Azerbaijan the number of payments is 23, in Russia – 22, in Turkey – 15, and in Sweden – 2. However, it’s more frustrating to see how much time taxpayers are spending every year to draft and pay taxes, in a word, to stay in touch with the taxation departments. Thus, in Armenia businesses spend 958 hours to draft the corresponding documents and pay taxes. With this mark we are in the 176th place among 181 countries. For example, in Azerbaijan businessmen spend 376 hours for the mentioned purpose, in Turkey – 223, in Luxemburg – 59 hours. In Armenia a businessman spends 3 hours every day to deal with the taxation department. In fact they spend a lot of time on paper eating. This means that they are wasting resources. It may seem absurd, but in fact it turns out that the taxation bodies are harming themselves. The reason is that it is not pretty clear how the tax inspectors should work: whether they should work to fill in the budget by all means or creating adequate conditions for the business to work normally.
In Armenia everything is mixed in a box, and plus everything is politicized. It is not clear whether they are thinking of the business environment or the business is just a target for or source of income for them. Even if they punish businesses it is not clear whether it is done for the purpose of compensating the budget loss or other purposes (a good example is Bjni company). It seems that the taxation department has focused all its potential on winning numbers of cash machines. If no, how should we understand the fact that there is no information concerning the above mentioned draft law in the taxation department’s web page and in the place of the most important news they have posted the lottery numbers of winning cash machines. On the other hand, supply is decided by the demand, thus people are more interested in lotteries and soap operas now than the real things.