Gas Operator Remains Armenia’s Top Taxpayer

Ruben Meloyan
July 27 2010

ArmRosGazprom (ARG), the Russian-dominated national gas distribution
company, remains Armenia’s number one corporate taxpayer, having paid
over 10 billion drams ($27 million) in various taxes and duties in
the first half of this year.

ARG increased its tax contributions by roughly 13 percent year on
year and tops the latest taxpayer rankings released by the State
Revenue Committee (SRC) on Tuesday, despite a further significant
fall in natural gas consumption in the country.

“That is mainly conditioned by the recent increase in the gas tariffs,
as a result of which our value-added tax contributions have increased,”
Shushan Sardarian, the company spokeswoman, explained, speaking to
RFE/RL’s Armenian service.

Earlier this year, state regulators allowed ARG to increase its gas
price for households by 37.5 percent because of the increased cost
of Russian gas imports. The gas price for corporate consumers was
raised by 17 percent. The unpopular price hikes took effect on April 1.

Gas consumption in Armenia already tumbled by 20 percent last year.

ARG, 80 percent of which is owned by Russia’s Gazprom monopoly,
blamed the drop on the economic recession and another surge in the
price of imported Russian gas that went into effect in April 2009.

Yet despite incurring serious losses, the company ended up at the top
of the 2009 taxpayer list. It was previously topped by K-Telecom,
another Russian-owned company that runs Armenia’s largest mobile
phone network.

K-Telecom is only fourth in the SRC’s 2010 rankings, with almost 7.3
billion drams paid in the first half. It was surpassed by the rival
telecom operator ArmenTel and the Aleks-Grig company, which controls
large-scale imports of basic foodstuffs into Armenia.

The country’s top ten taxpayers also comprise companies importing
fuel and cigarettes, the country’s largest metallurgical enterprise,
the national power utility and a tobacco factory. The SRC data shows
that the total amount of taxes paid by them was up by 22 percent from
the first half of 2009.

According to the Ministry of Finance, the Armenian government’s
overall tax revenues rose at a slightly higher rate in January-May
2010. Increased proceeds from value-added tax, the largest source of
those revenues, accounted for most of the gain.

By contrast, proceeds from corporate profit tax contributed only
16 percent of the revenue total and remained virtually unchanged in
absolute terms during the five-month period.

Many large Armenian companies, especially those owned by wealthy
government-linked businessmen, have long posted suspiciously modest
earnings. Prime Minister Tigran Sarkisian has repeatedly pledged to
make them “the number one target” of his government’s crackdown on
tax evasion.

The Flash company, Armenia’s largest fuel importer occupying fifth
place in the SRC list, paid only 7.4 million drams ($20,000) in profit
and payroll taxes in the first half. City Petrol Group, its main
rival that boasts the largest national network of petrol stations,
paid less than half that sum.

Flash’s deputy director, Mushegh Elchian, claimed that both companies
are barely making any profits at the moment. “Since competition has
tightened, we now work without profits,” he told RFE/RL’s Armenian
service. “Everyone wants to sell as much goods as possible, and in
order to do that, you have to make prices affordable.”

From: A. Papazian

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