Blame Game: Diaspora Investors Square Off With Armenia's Tax Officials During Live TV Link-Up
On February 24, a special live TV link-up between Armenia and the U.S. brought together diaspora investors, lawyers and tax authorities from Armenia to take a look at the issues involved regarding doing business in Armenia.
The link-up was organized by a group in Armenia that come out in support of the interests of diaspora investors. No one would argue that there is a lot of ground to cover on the topic.
One such investor, Edmond Khutyan, related how his company Arin Capital, had been criminally charged with tax evasion and premeditated bankruptcy eight months ago but he has yet to be questioned by Armenian tax officials on the matter.
Khutyan lawyer Nikolai Baghdasaryan noted that this negatively reflects on Armenian tax officials.
“If they don’t call the director in while at the same time charging the company doesn’t it leave the impression that a double standard is at work?” Baghdasaryan asked.
Participating in the discussion was Armen Alaverdyan, First Deputy to the President of the RA State Revenue Committee.
Alaverdyan confessed that he didn’t know the details of the Khutyan case. He only said that if the SRC has taken the matter to court it would definitely see it to its conclusion. The tax official promised to look into the matter, adding that if premeditated bankruptcy is the charge he didn’t believe that it would take a mere 1 or 2 months to resolve.
Alaverdyan stressed that diaspora investors can not only take advantage of the same rights as local Armenian businesspeople but aspects of foreign legislation as well. He sounded a more optimistic note than the lawyers representing diaspora investors and pointed to several success stories like VivaCell, Tufenkian and even Parisian Coffee. (The latter establishment was recently sold by its diaspora owner after she complained of heavy-handedness by Armenian tax officials.)
Alaverdyan noted that oftentimes diaspora investors are not adequately informed as to Armenian tax laws and this leads to a feeling that they are operating on an unlevel playing field. He said the government must do more to assist investors in this area.
He added that diaspora investors procrastinate in terms of petitioning the SRC and other agencies when problems arise. “They want to use the tax agency as a tool to force people to assume their obligations,” Alaverdyan said.
Also on hand was Vardan Marashlyan, Deputy Minister for Diaspora Affairs, who said that the ministry was doing all it could to assist diaspora investors and businesspeople who sought help.
Heritage Party MP Stepan Safaryan countered by saying that the ministry needs to be more pro-active in this regard and offer more outreach and information to prospective investors.
Marashlyan noted that the ministry was not involved in the Nareg Hartounian case since no one had asked for their assistance. (Hartounian and his family’s GH Storage Enterprises has been charged with tax evasion)
MP Safaryan recounted a recent visit to Armenia by a group of U.S. Congressmen. Safaryan noted that during meetings with the Armenian president and speaker of the parliament, the congressmen declared outright that Armenia was sliding backwards due to the lack of a favourable investment environment and that even diaspora investors didn’t want to do business in the country.
MP Safaryan said what’s at issue isn’t the case of one or two individual investors but a more widespread and systematic lack of faith in getting a fair shake.
He warned outside investors not to be taken in by sweet-talking local Armenian con artists who apply for a job, present a good face, and then take the investor for a ride.
MP Safaryan noted that problems are exacerbated since diaspora Armenians can’t really understand the ins and outs of the business reality and mentality at work in Armenia and avoid settling matters in the way things are traditionally done in the country.
The Heritage Party legislator pointed to the Lincy Fund backing out of further investment in Armenia and the Millennium Challenge Grant stopping further aid as two glaring examples of the problem.
SRC’s Alaverdyan pointed to the case of Parisian Coffee as a success story, noting that when owner Askhen Gortzounian launched the business in 2007 it got off to a promising start. The official noted that in 2010 the business (newly registered as Parisian Coffee Factory) had sales of 90 million AMD and 320 million in 2011.
He said that if the company, say, imported 92 million AMD worth of product in 2010 and paid 6.5 in tax, in 2011, the company had imports of 171 million and paid 31 million in tax. Alaverdyan claimed that such figures pointed to a profitable business.
Alaverdyan argued that most of the problems faced by diaspora investors stemmed from getting involved with unscrupulous individuals who are placed in positions of management. This, he said, oftentimes leads to civil disputes regarding property and ownership issues.
The SRC official advised prospective investors to get in touch with his agency first before actually starting any commercial enterprise in Armenia.
Alaverdyan conceded that tax agencies in Armenia needed to improve the way complaints are handled and to make the process all the more transparent.
ARF MP Ara Nranyan said these issues are faced not only by diaspora investors but everyone dealing with the tax agencies, court system and property registry (Cadastre).
MP Nranyan cited the example of George Tomasyan, a resident of Germany who managed a business in Armenia and was swindled out of 70 million.
Emotions flared when Asya Asatryan, a reporter from the States, got into the discussion.
She argued that if Armenia got its act together on this issue, people in the diaspora wouldn’t be raising such a fuss.
“You won’t find one American-Armenian who wants to discredit Armenia. If the name of Armenia is being dragged down, it’s the fault of the government’s failure to set things right,” Asatryan charged.
Armen Alaverdyan found the reference to Armenia’s dignity a bit much to take. He responded by saying that individual cases of corruption by Armenian official or citizens should be reported, rather than taking cheap swipes at the entire government.
“I am proud that I am a citizen of Armenia. Twenty years ago we had nothing and now we are discussing these matters out in the open. I’d say we’re on the right track,” Alaverdyan said.