The Largest Taxpayers

For the past couple of years the State Tax Services agency has published a listing of the largest taxpayers in Armenia, along with the amount of taxes they had paid. In the most recent release on taxes paid in 2006 (in Armenian), the agency reports the total amount paid by the largest 1000 taxpayers and breaks it down by type. The latter include custom duties, direct taxes (profit and personal income), and VAT among others.

The agency should be applauded for making the tax system more transparent, as well as making such data available to analysts and researchers. Further expansion of the reported information may enhance its usefulness. Two suggestions:

1. Is the reported information on a gross or net basis. In other words, is the reported information net of any refunds? It would be good to clarify this. As an example, the German owned Zangezur Copper Molybdenum Combine firm is listed as the largest taxpayer with total payments of about 33 billion Drams (USD 79 million), including VAT payments of 12 billion Dram (VAT tax rate is 20 percent). But because the bulk of the copper and molybdenum output is most likely exported, and as such is exempt from the VAT, (unless I am mistaken) much of the reported VAT tax should be refunded resulting in a near zero liability. Thus, it appears that it is the gross value that is reported. I think the net liability is critical.

2. The reported direct taxes (column 8 of the list), though not clear, seem to reflect business and personal taxes. More specifically, it appears to combine taxes on business profits (including repatriated income of foreign firms) and those on employee wages withheld by the firm. If true, it is not an easy task to untangle these two pieces with publicly available data. For the income tax, one needs information on total wages and its size distribution before the tax rate schedule is applied. Also, the presence of tax holidays for foreign investors complicates matters and makes it difficult to gauge how much of the reported direct taxes are on profits.

Again, the reporting of the tax information represents a major milestone. But it would be good if the reported information were further expanded. The media and analysts also have a responsibility for accurate and objective analysis of the reported information. Many are correct in highlighting the low taxes paid by some local businesses. Others, and despite of the best of intentions, have drawn some outlandish inferences from the tax figures reported over time; it is difficult to draw inferences on the underlying profitability of each firm in the published list.

It would be good to see more research done on the various aspects of the tax system in Armenia. Do we know of any ongoing research?

[Feb 11 -- you may download an xls file of the taxpayer data from here; you need Armenian fonts and can be slow to download. This data as well as data for prior periods is available in pdf format from here.]