Armenian Government Bans Tax Raids On Small Businesses

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Prime Minister Tigran Sargsyan

YEREVAN (RFE/RL)–In a further effort to stimulate economic activity in Armenia, the government banned tax authorities on Friday from raiding small and medium-sized enterprises (SMEs) and inspecting their books until the end of next year.

Financial inspections, meant to uncover and punish tax evasions, have long been a key source of complaints from Armenian private firms. Many of them — and SMEs in particular — say that tax official are simply harassing them to extort bribes and meet their rising revenue targets at any cost.

The government’s decision is clearly aimed at addressing those concerns now that Armenians grappling with its worst economic slump since the early 1990s. Prime Minister Tigran Sargsyan announced the extraordinary measure in parliament hours before it was formally approved by his cabinet.

“Following instructions from the president of the republic, we will make an unprecedented decision today aimed at boosting small and medium-sized business and creating a favorable environment of tax administration for them,” Sargsyan told the National Assembly. “In accordance with the government’s decision, all kinds of inspections in small and medium-sized enterprises will be banned in 2009-2010.”

Sargsyan declared earlier this year that large companies, many of them owned by government-linked businessmen, will be “the number one target” of the government’s ongoing crackdown on tax fraud coupled with reforms of tax legislation and administration. Earlier this month, the government submitted to the Armenian parliament a bill that would allow the State Revenue Committee (SRC) to deploy permanent “representatives” to local firms employing more than 500 people. The tax agents would have unrestricted access to their financial documents and other information related to taxation.

The bill was debated by the National Assembly last week, meeting with strong resistance from opposition lawmakers and some of their pro-government colleagues with business interests. They said the bill, if adopted, will only result in more abuses by tax officials.

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