Tax evasion mechanism exposed in Armenia’s largest supermarket chains as part of anti- corruption campaign– criminal cases initiated

As part of anticorruption campaign the National Security Service of Armenia has exposed tax evasion mechanisms developed by the largest business entities of Armenia. The mechanism is based on the registration of hundreds of individual enterprises that are in fact engaged in false entrepreneurship.

The press service of the NSS Armenia reported that according to the preliminary data, “Alex Holding” LTD, being a accompany that pays value added tax, reached an agreement with the former leadership of the State Revenue Committee (SRC) of Armenia at the end of 2016 to implement the realization of agricultural products bought from farmers in the supermarket chain “Yerevan city” under the name of different individual enterprises the annual turnover of which does not exceed 115 million AMD. This gave “Alex Holding” LTD an opportunity to pay only 2% turnover tax instead of 20% VAT and income tax.

The leadership of “Alex Holding” LTD registered 461 individual enterprises at the same notary office in the name of the employees of their company and the family members of the employees. Some of the enterprises were registered without the knowledge of the citizens, using the identification documents or their copies kept at “Alex Holding” LTD. When the turnover of the false individual enterprises reached the threshold of 115 million AMD, they were dissolved and new ones were registered.

Taking advantage of the opportunities granted illegally and arbitrarily by the former leadership of the SRC, “Alex Holding” LTD sold also many other types of goods in addition to the local agricultural products in the name of the mentioned 461 individual enterprises, again paying only turnover tax.

Preliminary calculations show that the total sales implemented in the name of the 461 individual enterprises has amounted over 40 billion AMD, for which only 2% turnover tax was paid, while in case of legal operation “Alex Holding” LTD should have paid 20% VAT and income tax.

Criminal cases have been initiated.

In addition, there is reliable information that the former leadership of the SRC has granted another 11 major companies engaged in network trade with an opportunity to operate under the same tax evasion mechanism, which obviously created unfavorable and unequal competition condition for many other companies paying VAT.

Checks are carried out in the mentioned 11 companies as well.