Vicious circle of Armenian economy

Despite the readiness of the Armenian authorities to withdraw dishonest taxpayers from the “shadow” and stimulate development of the stagnating economy, the “shadow” not only doesn’t want to reduce, but is also gradually growing. According to the Armenian economist and founder of the research center Alternative, Professor Tatul Manaseryan, the shadow turnover of the Armenian economy surpasses 75%, which is not admitted by the authorities. The professor thinks there is a tendency for the volume of the shadow economy to increase. The tendency is explained by the economist in terms of the growth of the taxable economy of Armenia, which leads to a three-fold increase of the “shadow” one.

There are several reasons for this sad situation in the economy of the republic. First of all, the existence of monopolies, i.e. oligopolies, that destroy small and medium-sized business. Secondly, the outflow of capital seriously threatens the economy. In the context of small market volumes, even monopolies begin to die within it, and this leads to capital outflow. Monopolies are characterized by the government as the existence of economic subjects with dominating positions in the market of the country. The result is that capital outflow amounts to $1 billion.

Monopolization of the product markets and other spheres of the economy contributes to stagnation of these spheres and inflation. A 17.4% correlation between taxes and GDP, which is fixed in the state budget of the country for 2012, confirms this fact. However, even this shameful index is presented by the government as a great achievement. This problem became a real brake on the Armenian economy. It has existed for 10-12 years. It appeared after the second president, Robert Kocharyan, came to office.

The cynicism of Armenian officials-oligarchs led to the fact that real owners of monopolies take positions in legislative and executive branches of power. A bright example of a monopolist-official is the head of the Committee on State Purchases of Armenia, Gagik Khachatryan, who owns (indirectly) two major product importers - MegaFood and Apeiron, plus a supermarket, a taxi-service, the Galaxy bakeries, Megamotors and the Santa Fe restaurant. The situation is that almost everyone knows about Khachatryan’s property except those who should know about it. How can they fight against the “shadow” economy in Armenia if the top tax official, Khachatryan, is in the “shadow” himself?

Another bright example of a monopolist is the owner of the Alex Grig Company,  oligarch, importer on several product markets, deputy of the Armenian parliament and representative of the ruling Republican Party of Armenia, Samvel Aleksanyan. Aleksanyan’s company provides a monopoly on imports of sugar and butter and dominates on the grain and flour import markets. Moreover, he possesses the most powerful chain of supermarkets in Armenia, Yerevan City. Last year Alex Grig was one of the top three major taxpayers of the country. However, it doesn’t stop the deputy-monopolist to stay in the “shadow” and gain a superprofit.

To uncover the schemes by bureaucrats and officials of avoiding tax bodies, you don’t need to be a genius. You can simply talk to owners of product shops, who purchase about 30% of their products from monopoly importers. It is impossible to buy these products from importers-competitors, as there aren't any. Armenian retailers have no ability to go abroad and import this or that product, as Armenian customs will fleece them and they will have to sell products for higher prices than the monopolists. In this context, the importing companies belonging to Armenian bureaucrats sell products to retailers without presenting the consumers their commercial invoice. Considering the fact that without a commercial invoice the value-added tax is 20% (if a commercial invoice is presented, it is 2%), the monopolies hide in the “shadow” their real turnovers avoiding tax. As a result, the problem of taxpaying concerns retailers rather than monopolists. The retailers, victims of monopoly speculation, try to hide their real turnover by not giving cash vouchers. Thus, a vicious circle is being formed in the republic.

David Stepanyan, Yerevan. Exclusively to VK