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Serzh Sargsyan, Armenia’s recently self-appointed president, in his commitment to wiping
out corruption in Armenia, and in order to raise the money to fund his
impressive two and a half billion dollar budget, has sent a strong message to
all his Taxmen. As of immediate effect, everybody will have to pay their taxes,
irrespective of who they are and whose coffers they have been filling. This of
course includes the infamous Gagik Tsarukian (Dodi Gago), Samuel Alexanian
(Sugar Sam) and Misha Bagdasarov (Mika), who have to date had little time for
taxmen, or for that matter for customs officers. They have preferred to sell on
a cash basis, and more often than not, their import and other purchase documents
have gone straight in the bin. As far as they have been concerned, they have never
been involved in buying or selling most of the goods and materials they have monopolized
throughout the duration of the former presidency.
But that is
now apparently going to change, they all now have to declare every kilo or
liter they buy and sell and they will all pay their taxes and their customs charges
- except it seems Misha Bagdasarov. It turns out that, after having paid tens
of millions of dollars to get his man into the presidential palace, Misha is
not too keen on having to pay his taxes, which is of course understandable, he
needs to recoup his losses. That has put the brakes on Serge’s anti-corruption drive,
and it has caused somewhat of a rift among the various oligarch factions, and
within the tax and the customs offices. Robby’s men are complaining - if Serge’s
man is getting his free passes at the tax and the customs offices, then why
shouldn’t they get the same? Credible information has it that this standoff is
now going on between the oligarchs and within the tax department.
So, even if Serge had good intentions to reign in the corruption that has been escalating
in Armenia for too many years (which I doubt), despite his denial of being associated
with or involved in this oligarch business, he has been such a major player in
that corruption, that he will simply not be able to make the changes needed to improve
the status quo.
Despotism is an ever-deepening quagmire that Serge has been slinking in for too many years.
To bring about the changes he is promising, he will have to step out of the
fray and hope that someone less deeply emerged might be able to clean up the
mess that he and his fellow cronies have made. And those who have been
following my work will know that that includes too many in the international
community.
BTW, concerning
Serge’s $2,500,000,000 budget for 2008, the tax office has prepared itself for a
nice end-of year scam. If khosq readers are interested, send me a message and I
will explain.
There is a big fallacy in
nazarian 27 weeks 4 days ago
There is a big fallacy in Armenia that a big budget means anything. If we put the simple fact that they quote it in dollars that has depreciated during the past few years, it is still a big mystery as to how a big budget promotes the economy.
1. Tax collection takes the money out of the pockets of the consumers, who would otherwise spend it, and puts it in the pocket of the government. The government then goes and spends the money. The net effect of this on the economy is zero.
2. In order to be able to spend all that money, you need to increase the size of your government. The net result is that people who would be contributing to the economy are now government employed freeloaders. The government employees comply with the 80:20 rule. 20% of the employees do the work while the other 80% just draw a paycheck.
3. In order to fill the treasury, you need to hire an army of tax collectors. A single tax collector is bad news in Armenia (they perhaps are the most corrupt people there). A horde of them is a disaster for businessmen.
I received an Email asking
Bruce Tasker 27 weeks 4 days ago
I received an Email asking about the end-of-year scam, so here it is:
There has been a very simple change to the way the tax office will be reporting tax revenues. Starting at the end of the 2008 fiscal year, the tax office method of accounting will change from the 'cash' to the 'accrual' system.
With this system, the tax office can report an amazing increase in the amount of taxes collected. But, this will only reflect the change from cash to the accrual system, and in fact all the taxes reported can be on the balance as 'Receivables'. That is to say, taxes that the tax office anticipates it will collect, but in fact are not collected (or which they put in their pockets), in other words, 'Bad Debts'.
The Armenian Government, with the help of the WB and the IMF, uses this system to great advantage, transferring 'Receivables' from one year to another, which is far from the requirements of GAAP, or GAGAP, or the European accounting standard of IAFS, in which 'Bad Debts'('Receivables' and 'Payables') are typically written off no later than after a period of 2 years.
In the 'Governments Finance Rehabilitation Plan', which I studied for the Parliament in 2004, old energy debts, or 'Receivables' and 'Payables', dating back to 1996 were resurrected and written off, many of which had been written off at least once before. In this way, the Government lost $450 million worth of old energy 'Receivables' and 'Payables', which often comes straight out of the budget. Or in one case, as I have explained, a packet of $107 million worth of 'Receivables', which should have been written off, was turned into a 'financial instrument' and used to privatize the Kajaran Molybdenum factory.
In 'Accrual' accounting, 'Receivables' and 'Payables' represent an opportunity for the corrupt to make massive gains, which can be easily hidden.
Sounds like the ‘mark to
nazarian 27 weeks 4 days ago
Sounds like the 'mark to market' way of showing revenues that Enron used for some time, i.e. showing revenue even though there was no actual cash flow.
Here is the thing though. The government watches everyone else through auditing (or it is supposed to). Who watches the government?
The parliament is supposed to do that through checks and balances that are in the constitution. But they don't do that.
Exactly right, the
Bruce Tasker 27 weeks 4 days ago
Exactly right, the government watches everyone else (in the private sector), right down to the last Luma, but nobody controls the Government, least of all the Parliament, although they do of course do their checks. After all the Parliament is dictated to by the Government, or the President.
And the World Bank and the IMF have made no effort to have the problem resolved, although they are meant to - it is their system, and they monitor it very closely, and make their annual reports.
Through the past ten years they have watched on (even helped) as the Government writes off hundreds of millions of dollars, and they have not reported the problems, preferring to create a 'Caucuses Tiger' on the corruption they themselves have been deeply involved in.
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