Interview of the Chairman of the State Revenue Committee under the Armenian government Gagik Khachatryan to Mediamax News Agency and Banks.am portal

- Mr. Khachatryan, at the beginning of the year, Armenian Prime Minister stated that from that time on, big business would be in the center of the government’s attention, particularly, in the context of stricter control over fulfillment of its tax obligations. Many people got the impression that, making such statements, the Prime Minister made a certain “warning” to some big companies. How justified is such perception of the statement?

- I do not think that the emphasis in the Prime Minister’s statement was made on a warning to big companies. I would rather assess the statement as an instruction for the State Revenue Committee. 

One of the 7 main goals of the government’s Strategic Program on Tax Administration for 2008-2011 is to secure correct, all-comprehensive and timely taxation of big business, which will significantly contribute to development of the entire tax system. This task is realized with the help of various measures.

In particular, a few days ago the new list of taxpayers was approved, which included 325 organizations, the administration of which will be realized by a single tax inspectorate of big taxpayers instead of previous four branch inspectorates.

At present, mechanisms of efficient control over declarations on revenues and property of senior officials are at the stage of elaboration, which aims at revealing cases of carrying out entrepreneurship activities by them. Mechanisms are also in process of elaboration to realize inspections in big business, as well as programs for retraining the employees of the inspectorate for big taxpayers. 

- What concerns you most of all in the context of tax and customs commitments of the big business. What is not as it should be?

- This is a very volume issue, and I will try to only single out the tasks, which come out while paying or calculating tax commitments of both big business and business in general. These are issues concerning correct registration of turnovers, services and goods in tax reports, the issue of implementing electronic tax system of accounting and reporting, issues of back taxes and overpayments, problems related to price transfer, presence of shadow turnovers in big business in individual cases, etc. 

As a common task in our economy and especially the big business, I would single out the level of documents circulation, which among individual subjects leaves much to be desired. Small business accuses the big one of the fact that the latter does not provide documents while purchasing goods, and the big business, in its turn, accuses the small one of the fact that the representatives of the latter do not accept documents. In the final end, the state suffers as well, since the process of running business without the corresponding documents increases shadow turnovers.

- One gets the impression that so far the concept of interrelation between the authorities and big business has not been formed yet and those relations are built basing on personal contacts of this or that entrepreneur. If you agree with this, can one elaborate a concept, which would outline the basic principles of interrelation between the government and big business?

- I do not share that opinion and I prefer referring to facts only, than making assessments, based on suppositions.

I would like to call your attention to the following: if a few years ago the relations between fiscal bodies and big business were not welcomed, and the fact was related to manifestations of suspiciousness and subjectivism, now the situation has changed. Today it is impossible to give an optimal solution to issues of administration and give correct assessment to reforms without communicating with representatives of business.

At present, clear-cut and normal relations are formed between tax and customs bodies and the representatives of big business. In recent years the specific weight of taxes, paid out by big business, has been making 60% in the total volume of tax proceeds to the budget. That is to say, big business fulfills its main tax commitment, taking upon itself important responsibility for the revenues of the state budget. In this connection, tax and customs bodies, realizing administration, try to build partnership relations with taxpayers, and put emphasis not on compulsion, but on consolidating self-rating system.

This does not mean that big business is ready to fulfill its obligations with pleasure. There are great risks and a big volume of work for tax and customs bodies here as well.

In particular, there is acute necessity to cut down shadow turnovers in construction, mining industry, trade of consumer goods, production and import of excisable goods, production of certain foodstuffs, as well as hotel business, transport and tourism. 

Besides, efficient administration of the number and all types of imported goods is not secured yet. It is also necessary to increase the efficiency of full and timely taxation of the entire post-import chain, as well as solve the issue of collection of artificial overpayments by a number of managing subjects by means of false documents.

Talking about personal contacts, I will note that Armenia is a small country and we all know these or those persons (businessmen, MPs, Ministers or art workers). And taking into account this fact, one can give such assessment to any industry.

Concerning elaboration of a concept for interrelation with big business, our actions for the nearest three years are fixed in the governmental program “Strategy of Tax Administration for 2008-2011”. In particular, there are three directions approved concerning big taxpayers:

- target approach to bases of single-type taxes, collected from taxpayers;
- prevention of entrepreneurship activity by senior officials;
- elaboration of new mechanisms to reveal people, who evade taxes. 

- There is also an opinion that if such a concept is nevertheless elaborated, it will not be efficient given monopolistic manifestations in a number of industry branches in the Armenian economy.

- I believe that there is no necessity for such a concept, and one should work with big business by means of concrete measures, which are fixed in above-mentioned “Strategy of Tax Administration for 2008-2011”.

Being the Chairman of the Committee on State Revenues, I do not assess the Armenian economy as “monopolized”, since this is beyond the limits of my authority. I will say that today only small business is privileged in our country. The remaining subjects are in a single tax field and in equal conditions.

- If we talk honestly, what should and what should not big business do in Armenia? Here we do not talk about legislative, but about moral commitments.

- Representatives of big business should realize that, paying taxes, they contribute to developing the country and the corresponding infrastructures, which represent a fertile ground for a healthy economy. 

To my personal opinion, besides irreproachable fulfillment of tax commitments, transparency in activity is very important in big business, as well as realization of social programs. A bright example of this may be “K-Telecom” company, the policy of which is directed to realization of social and philanthropic programs.

Recently, the National Assembly of Armenia approved changes and amendments to the law on “Accounting”, according to which big business should necessarily undergo audit. I believe that application of the given item and the further developments will show which representatives of the big business are ready to present financial indices to the society and to their shareholders. Our Committee only welcomes such measures, since they will lead to reduction of shadow turnovers.

- Which are the obstacles for the government and the big business today for their cooperation in the sphere of corporate social responsibility? And which are the main reasons, hindering efficient dialogue between business and the state in our country?

- You have touched upon an important issue. Corporate social responsibility in our country has always been related to the government, and it turned out that the very government took upon itself the main responsibility concerning social obligations for the population. I believe that along with development of economy, this responsibility will be handed over to the representatives of big business. In my previous answer I have already brought an example.

Concerning obstacles on the way of cooperation between business and the state, I will say that here an atmosphere of mutual trust and common goals, among which economy development, should be present.

Suspiciousness and “let somebody else pays first, then – I will” approach hinder the development of economy. Let everyone fulfills his/her commitments, not looking at others.