President Serzh Sarkisian has launched an unusually blistering attack on the Armenian customs, saying that corruption within its ranks is “thriving” and hampering the country’s economic development.
Speaking at a high-profile meeting with the leadership of the State Customs Committee (SCC) late Thursday, Sarkisian said customs officials abet smuggling to illegally enrich themselves and penalize importers refusing to pay kickbacks. He threatened to fire those of them who will fail to “work honestly.”
“In our country, apart from tax and customs revenues, there are no sources of solving social problems,” Sarkisian said in remarks broadcast by state television. “Therefore, we must follow the path of self-cleansing.”
“We all must live in a country where one can do business without complications,” he added. “All studies show that it is small and medium-sized businesses that face difficulties in the first instance, whereas no wealthy entrepreneur has problems in Armenia. Especially with the customs system.”
The remarks were extraordinary for a man who has long been accused by government critics of having disproportionate influence on economic life and sponsoring government-linked businessmen controlling lucrative sectors of the Armenian economy. They came less than a week after the dismissal of Armen Avetisian, the much-maligned head of the SCC and a reputed Sarkisian confidante. Avetisian was fired amid reports that the SCC will be merged with the State Tax Service (STS) as part of a government reshuffle planned by the new Armenian president.
In his comments, Sarkisian pointed to the widespread smuggling of goods into Armenia by businessmen colluding with customs officers as well as other fraud scams that enable importers to evade customs duties and other taxes. “Many of you know about this problem,” he told senior SCC officials. “I am even sure that some of you know which concrete individuals are engaged in the practice but are taking no measures.”
Sarkisian also accused the SCC of routinely abusing its discretionary authority to ignore invoices submitted by importers and themselves determine the value of imported goods. The practice is a key source of complaints from Armenian businesspeople involved in import operations. Many of them claim privately that they are forced to pay hefty bribes to make sure that their goods are not overtaxed by the customs.
Only one local firm, Royal Armenia, has so far gone public with such accusations though. Its owner and deputy director were arrested on controversial fraud charges in October 2005 after repeatedly alleging that senior officials and the deputy head of the SCC, Gagik Khachatrian, in particular, offered to give their coffee-packaging company preferential treatment in return for sharing in its extra profits. The SCC denied the allegations.
The two businessmen were sensationally acquitted by a district court in Yerevan last July only to be retried and sentenced to five and two years in prison by an appeals court four months later. The district court judge who acquitted them was dismissed by then President Robert Kocharian in October.
Khachatrian, who is now the SCC’s acting head, also faced in 2006 allegations of corruption and unfair treatment from Khachatur Sukiasian, a wealthy businessman and parliament deputy. Sukiasian is among prominent backers of opposition leader Levon Ter-Petrosian who went into hiding following the launch of the Armenian government’s ongoing post-election crackdown on the opposition. Several businesses owned by the tycoon were raided and subsequently fined by tax officials after he publicly voiced support for Ter-Petrosian last fall.
Sukiasian and his extended family appear to have fallen foul of the SCC as well. The Pares-Armenia company, in which they have a 50 percent stake, is the exclusive distributor in the local market of cigarettes manufactured by the Phillip Morris group. In a statement on Friday, the company claimed to have been unable to import cigarettes in recent months. Its executive director, Hovannes Demirchian, said customs official have told him that they received orders “from above” not to process Pares-Armenia imports and to refuse to sell mandatory excise tax stamps to the company.
“Where are the principles of market-based relationships and where are the reforms by which the public should be guided and about which we hear on television every day?” Demirchian said, appealing to the newly appointed Prime Minister Tigran Sarkisian.
According to the STS, Pares-Armenia is the country’s eighth largest corporate taxpayer, having paid 7.6 billion drams ($24.5 million) in taxes last year.