“Discussion: Because of the Tax Administration, Thousands of Businesses are Going Bankrupt.”
06.02.2017
12:00
The quality of tax administration in business sector bears positive changes in Armenia but there are still many unresolved issues in terms of improving the business environment, providing equal competitive conditions for all operators. "On the one hand, the informal economy should be levied a tax, on the other hand, such a competitive environment needs to be provided in order the businesses working in the “white field” have the opportunity to develop, not to go bankrupt.

Therefore, it is necessary to improve the business environment more rapidly than the taxation of the informal economy,” Gagik Makaryan, Chairman of the Republican Union of Employers of Armenia, said.

Gagik Makaryan, Vahagn Hambardzumyan, Chairman of Armenian Association of SME Accountants, and Armen Yesoyan, Head of “Taxpayers and Businessmen Rights Protection” NGO, participated in the discussion entitled “Tax Inspection Issues in the Business Sector” at Media Center on February 6.

The Prime Minister Karen Karapetyan has made numerous instructions to agency authorities for creating favorable conditions for the improvement of the business environment, and at the same time calls to punish unscrupulous taxpayers. Meanwhile, the prime minister instructed the law enforcement agencies to refrain from interfering in the activities of economic entities in the fight against crime within the jurisdiction of the exercise of their discretionary powers and to take enforcement actions undermining businesses only in extreme cases.

“The tax administration in Armenia has worked in the administrative-command and planning mechanisms so far. There are attempts to change it but the success is not very visible yet. Therefore, the Prime Minister's recommendation not to bother businessmen, is due to the fact that the business environment faces such a situation when a biased and inadequate inspections may cause more damage to the economy than vice versa,” Makaryan said, adding that as a result of inadequate and improper inspections, many businessmen and enterprises are now on the verge of bankruptcy.

The tax collection methods have not changed for twenty years, Armen Yesoyan said, adding that attempts were made in the formation of new approaches but they have not reached the tax administration authorities yet. He hopes that the change of State Revenues Committee leadership will result in the human resources updates in the middle and lower-ranking circles.

“As for the Prime Minister's statement that unscrupulous taxpayers should be punished, I think the approach should be different. Not a punishing policy but proportionate administration should be conducted. The purpose of this mechanism should be not the destruction of an entity but the creation of equal conditions. Even if the entity made a violation, there is no need to direct all the leverages for the punishment, instead proportionate punishment should be applied to a specific entity. For example, the legislation provides a few penalties for delay in reporting or tax evasion. But until now, the tax inspectors had a task to determine the specific charge and levy it,” the speaker said, adding that the tax administration should have not a fiscal goal but to change a problematic taxpayer.

He also expressed concern that during the pre-election period, the tax administration may suddenly turn into a destroying or suppression mechanism against businessmen from a rival team. "This mechanism should be far away from politics, and should be aimed at ensuring equal conditions in the economy,” he said.

Vahagn Hambardzumyan said that many issues have been resolved in terms of administration by the new Tax Code. “They relate to the filing of tax returns, or reduce the rates of taxes and clarifying the terms of audits,” Hambardzumyan said, adding that alongside the mitigation of tax administration, other risks should be taken into account. "There are taxpayers in Armenia who begin to reduce the level of fiscal payments as soon as they see that there is no risk of tax audits. We have an issue of performing responsible tax payments. So we really need to take appropriate measures so that it does not have contagious effects on other entities,” he said.

To watch the video, follow the link.  

Arshaluys Mghdesyan, editor/events coordinator at “Media Center”

To contact the author please send an email to arshaluismghdesyan@pjc.am.

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