Tuesday, 23 September

Economy  |  

Businessmen Lament: “They want us to practice European values while continuing Asian graft”

Levon Hayrapetyan


13:49, March 3, 2012

After meeting with a dozen or so medium and large entrepreneurs, one thing was evidently apparent – their fear. None wanted their names to be used for this article.

They were fearful for the continued operation of their businesses and their long-term prospects of remaining in Armenia.

Many were thinking of moving their businesses out of Armenia.

“The government wants us to play by European rules while continuing the Asian practice paying bribes and graft,” lamented one businessman.

Another one said that the vast majority of informed businessmen in Armenia wanted to operate according to the law, to pay their taxes, and devote their energies into growing their businesses.

“Nobody wants to line the pockets of government officials who do nothing to assist us,” he said.

They all pointed to the practice of setting arbitrary “control prices” by customs officials in Armenia as the crux of the matter. “If these prices are kept in place, if they do not allow us to breathe, then the only option remaining is to close up shop,” said one entrepreneur. “This issue must be discussed in the press so that those in government will also review the matter.”

The mechanism of customs formulations at Ararat Regional Customs

Authorized representatives of both legal entities and individuals must declare goods to the customs house after receiving documents for the imported goods from the customs warehouse.

Each organization is parceled between brokerage offices, whose directors happen to be the heads of various customs agency units operating in the “shadows”. Thus, it is absurd to say that companies can get their goods cleared through customs simply by submitting a standard customs declaration. Only one or two companies are allowed such “self declarations”, and even then, permission comes from the very top of the State Customs Committee. We are now looking into these brokerage offices and will shortly publish the actual names of their owners.

Infractions in the Valuation Division

After the initial declaration, the customs declaration and other relevant paperwork is presented to the appraisal division where the chief and his deputy apply the so-called “control prices” to the imported goods. And this takes place regardless of whether the shipment was processed by Article 87 (1st method) or Article 91 (4th method) of the Customs Code.

What really irritates businessmen in Armenia is that these “control prices” do not seem to have any connection at all to international market prices.

There is an unwritten law at work in the valuation division related to the halving of the VAT to be paid to the government. In essence, of the difference of the VAT between the value of goods imported by legal or physical entities and the value mandated by customs officials is divvied up according to a 40-60% or 50-50% formula. For example:

Version1 (Customs Code Article 87, Point 1): If the goods invoice shows a price of 1,000 dram for 1 kilo, then the control price set by customs is 1,500 dram. Customs officials then tell you to pay 200 dram rather than the planned 300 dram in VAT. At the end of the month, the importer pays 8 dram in bribes to a top level customs official for the 100 dram saved in VAT payments. This is possible because each official at customs has control of their own little fiefdom to operate as they please. 

Version 2 (Customs Code Article 91, Point 4): Here the amount of bribe to customs decreases, which is why the customs officials agree to this method only grudgingly. For example, if as in Version 1 above, the invoice value of 1 kilo of an imported good is 1,000 dram and the control price 1,500 dram, the goods are processed at 1,200 dram. Thus, the VAT to be paid to the government becomes 240 dram and a bribe to be paid at the end of each month is 4.8 dram (40-60% relationship) for each 60 dram saved on per kilo. 

An unsuspecting businessman accepts the “helping hand” of customs the first time (for helping to pay less taxes), without realizing that he is being moved by the customs official to “shadow” commercial activity. The bribes cannot be written off and the company’s financial books cannot account for the loss. The businessman, in order to make–up the amount of the paid bribes (which amount to a considerable sum at the end of the month), must either sell a quantity of goods at a price violation or at a low price. 

After completing the shipment paperwork, the businessman falls into the clutches of employees of the Armenian State Revenue Committee (SRC), Pre-release Control Department, to overcome the final obstacle of the shipment’s examination and release. 

In addition to the fact that customs examiners can arbitrarily force the emptying of the shipment in the customs terminal, saying that it has to be examined and adding more expenses for the businessman, here too the release tariffs are employed as bribes in the following way: 

20 ft. container            AMD 10-15,000

40 ft. container            AMD 15-20,000

Cargo  trucks               AMD 35-40,000

Train car                      AMD 25-35,000 

In the case of exports, examining officials demand $100 - $200 without even examining the cargo, before they stamp the cargo and allow it to pass. 

Even after paying the bribe, the businessmen wait from 30 to 60 minutes for the OK from the Chief of the Pre-Control Department to receive the cargo. After this, employees at the customs warehouse Contraband Division must be paid AMD 5,000-10,000 to sign the cargo pass permit. 

These tariffs are used for both import and export of legal cargo, when the shipment checks out in every detail to the accompanying cargo paperwork. 

(To be continued)


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Comments (21)
1. areg17:24 - 3 March, 2012
irakanutyan@ chi hamapatasxanum sut baner mi grek amota
2. Վարազ Սյունի (Ամստերդամ)18:50 - 3 March, 2012
Հայաստանում, հատկապես փոքր և միջին գործարարները, ՊԻՏԻ համախմբվեն ու ստեղծեն մի ոչ պետական կազմակերպություն (ՀԿ, Արհմիություն) , որը էֆեկտիվ կպաշտպանի իրենց յուրաքանչուրի շահերը: Վարձեք իրավաբաններ, ակտիվիստներ, ժուռնալիստներ, գնեք գաղտնի կամերաներ և նկարեք կաշառք վերցնելու պահին:ՄԻԱՅՆ ՀԱՎԱՔԱԿԱՆ ուժով: ՄԻ նստեք սպասեք: Պետությունը նաև դուք եք:............................................Հայաստանում մարդիկ պիտի ՋԱՐԴՈՒՓՇՈՒՐ անեն այդ կեղծ «ամոթ է, բա ինչ կմտածեն/կասեն»-ը:..............................................Կաշառք ՏԱԼԸ ևՎԵՐՑՆԵԼԸ Հայրենիքի ԴԱՎԱՃԱՆՈՒԹՅՈՒՆ է:
3. ANRICORUPCIA21:14 - 3 March, 2012
Dra hamar el Naxabactoxumayin Varchutyan pet@ 1 tarva mej Hyusisayin poxotayum 2 hat bnakaran e cerq berel, Caxkacorum 2000000$ amaranoc karucel, Paronyan poxocum 2 hat obyek e gnel u 4 hat Mercedes e gnel, chashvac te qani gorcarari het e ayspes acac pay mtel. Isk duq asum eq gorcararner@ pakum en irenc biznesner@.
4. Andranik00:59 - 4 March, 2012
Vorpes gorsarar nshem, vor vichaky irakanum shat aveli vat e.....gumar korzvum e amenureq - pahakits minch minchev maqsatan bazhni pet, ....xaytarak vichak e
5. mukuch12:15 - 4 March, 2012
Ինձ շատ հետաքրքիրա, ինչ որ մի բան գրելուց առաջ փորձում եք գոնե մի քիչ իրականությանը մոտ բան գրեք, թե լրիվ միևնույննա:
6. Poghos12:46 - 4 March, 2012
Xi eq esqan chuzogh
7. Vigo23:09 - 4 March, 2012
Mer azgi u petutyan vichaky dra hamar el senca vor vechni djgoh enq ameninchic u sax nayum en te urishy inch uni, esqan barepoxum vor arvec verji tarinerin vochmek hashvi chi arnum??? Xi himikva tamojnyan u mi qani tari arajvany kareliya hamematel???? Amota eli verj tveq !
8. ashot00:48 - 5 March, 2012
It is easy to estimate the control prices based on observing the market prices in Armenia's wholesale markets. Perhaps the finance ministry can do that and publish them on their website at the beginning of every quarter(jan. 1, april 1, july 1, oct. 1). And then ALL the importers customs clear their cargoes based on the control prices published at the beginning of each quarter. I heard that is what is done in Georgia. I believe our government can do that as long as there is a will.
9. Demian01:32 - 5 March, 2012
Ver@nshvac hodvaci tvyalnery chen hamapatasxanum irakanutyan@: Es inqs linelov gorcarar tariner sharunak ar@nchutyun em unecel maksaini het ev kani vor ashxatun em bacarcakapes orenqov, voch mi angam, voch mi maksavor indzanic chi porcel gumar korzel: Hamarum em, vor kasharq tvox@ arajin hertin inqn e handisanum orinaxaxt ev shat depqerum kasharq tal@ sadrich gorcoxutyunneri hetevanq e: Ashxateq orenqov ev maqur ev shar mi areq urishneri vra>
10. Wal13:55 - 5 March, 2012
որպես ներմուծող հաստատում եմ՝ այն ինչ գրված է, իրականություն է, և անձամբ ես նկարագրված իրավիճակներում հայտնվել եմ:
11. es em 18:10 - 5 March, 2012
mejberum vorovhetev talan e hayastanum or@ cerekov tirum talan,pokr biznersnerin xextum en arhetakan dasht stexcelov bacatrem asenq te mi xanutum 3000 d ktron chen tvel u harkain qondzrotner en haytnvum u aktavorum 300 000 dran , hle chmuces eli tes glxit inch oyin en hanum vor mtacumes miayn hayastanic vonc clkes( miak eraanq)ba um duxx@ heriqum e gnaceq aparan mi at super market mteq u pahanjeq ktron, kam haci prum, orenq groxner@ evropayic em xosum duq ur evropan ur ,
12. HAYK20:21 - 5 March, 2012
AMOT ayn kapiknerin,vor verevi comentnerum grum en te gorcarar en u kasharq chka hima,apsurd eq asum u erevi et kasharakerneric eq,voch gorcarar...
13. HAYK20:28 - 5 March, 2012
inqs gorcarar em,ev ashxatum em orinakan,bayc eli galis en stugman ev uzum nuyn milionner@... ev meknabanum en te hnaravor chi , mi ban anum es,ev vochinch chen gtnum.lav bacatrum en te inchi hamar em talis irenc ayd kasharq@ SA E IRAKANUTYUN@ !!!
14. sergik23:43 - 5 March, 2012
ete suta et inchiza vor amena qosot maqsajin ashxatoghn ajsor amenatank meqenajova man galis ....tekuz najeq naghkin u nerka maqsajin varchutjan ashxatoghnerin u peterin.... tarber biznesner, tner, meqenaner, qnneq nranziz yuraqanchyuri aprelakerpe minchev maqsayin zarayutyan anznele,
15. Mher09:56 - 6 March, 2012
Ov el lini et pashtonnerin kvercni, menak chaseq che, poxi cer@ teseq, heto nor aseq che, ov chi uzena 2 senyakanoc xrushovki tex@ mec aranznatan@ apri..... dursa galis en mi qani oligarxner@, dzer asac gorcararner@ pti harstanan, mnacac@ che
16. raf14:54 - 6 March, 2012
ur en Hay ROBIN HUDNER@
17. Ando11:08 - 7 March, 2012
shat aveli lav e hima
18. Loml Pimas18:52 - 7 March, 2012
As a foreigner doing business here, it disgusts me that we are being held to ransom by corrupt, lazy, ignorant, arogant govt officials who think it is their god given right to steal from decent people trying to make an honest living. What chance of developing does this country have while these 'rules' are enforced at every chance they see.
19. karina gevorgyan23:50 - 8 March, 2012
tenc ban 1 tarum hnarovor chi ay anti
20. karina gevorgyan22:00 - 11 March, 2012
es ures ay antikorupciya
21. Mukuch21:26 - 13 March, 2012
Shat sxal hotvac a... Sa krox er linel mi 20 tari arach
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