Withering Economy of a “Flourishing and Developing” State: Armenia’s Dependence on Loans and Gambling Revenues
Nikol Pashinyan asserts that Armenia is currently a flourishing and developing state. The empirical basis for this assertion remains unclear and appears to be known only to the Prime Minister and his inner circle. Available economic data, however, suggest the opposite. The economy of the purportedly “flourishing and developing” state is in a precarious condition, with its largest taxpayer being a trading company whose activities are only tangentially connected to the domestic economy. Specifically, the company imports mobile phones and electronic equipment from multiple countries and re-exports them to Russia.
How can a state be described as flourishing when the list of its largest taxpayers is dominated by such companies, while domestic production and value-creating enterprises are losing their competitive positions?
The State Revenue Committee’s recently published list of the 1,000 largest taxpayers for the first nine months of this year provides a clear indication of the current state of the Armenian economy. Among the top 20 taxpayers, the majority are trade companies (importers and resellers), gambling enterprises, and financial institutions. This composition reflects the structural characteristics of the economy.
At the top of the list is Mobile Centre Art, which gained prominence following sanctions imposed on Russia, when it engaged in substantial re-export activity to that country. During the first nine months of this year, the company paid approximately 52.5 billion drams in taxes, surpassing even the Zangezur Copper-Molybdenum Combine (ZCMC) in total contributions.
Prior to sanctions imposed on Russia, the company had comparatively modest tax obligations, but in recent years it has contributed tens of billions in taxes derived not from domestic production but from import-export operations. While these payments inflate budgetary figures, they do not substantively benefit the domestic economy or citizens. This mechanism enables the authorities to present the fiscal situation as favorable while masking structural weaknesses.
Tax contributions from the Zangezur Copper-Molybdenum Combine have declined significantly. In the first three quarters of the previous year, the enterprise paid over 83.6 billion drams, whereas in the same period this year, it has contributed only 36.1 billion drams. Although tax payments increased in the second half of the year, reaching 16 billion drams in the third quarter, they remain 47.5 billion drams below the previous year.
These changes occurred after the government became a shareholder in the company.
The tax payments of the combine have declined for various reasons, but particular attention should be given to events that took place at the beginning of the year involving one of the country’s largest and leading enterprises. Due to an announced but unclear strike, the combine was forced into several days of idle shutdown, while the authorities maintained complete silence, disregarding the resulting economic and budgetary losses. The reduction in tax payments is, in part, a consequence of this situation.
Among the top 20 taxpayers, three banks—Ardshinbank, Ameriabank, and Acba Bank—are included, with Ardshinbank experiencing a notable increase in tax payments. The bank, consistently among the most profitable in recent years, has seen its tax contributions quadruple to 31.9 billion drams, primarily from profit tax.
The same pattern applies to the other banks.
These funds are generated at the expense of citizens and the broader economy, through high interest rates on loans and elevated service fees. It is precisely because of these high profits that banks occupy leading positions among major taxpayers, displacing domestic producers. Ideally, taxpayers should be entities that generate additional value, contribute to economic development, and increase societal incomes. Instead, importers, trading companies, banks, and gambling enterprises dominate the top positions.
This outcome is not coincidental, particularly considering that gambling activity has flourished in Armenia in recent years. When Nikol Pashinyan speaks of a “flourishing and developing state,” this may be precisely what he is referring to. Among the top 20 taxpayers, three companies operate in the gambling sector. Meanwhile, domestic producers and other value-creating enterprises are increasingly marginalized.
Rather than encouraging domestic production, policy favors imports. Consequently, importers grow stronger while local producers are excluded from competition. It is therefore unsurprising that the state budget has come to rely heavily on revenues from re-exports, trade, financial institutions, and the gambling industry.
Small and medium-sized enterprises (SMEs) are also under significant pressure. While large taxpayers maintain their positions, SMEs have borne the brunt of fiscal enforcement. This is reflected in the fact that tax payments by small and medium-sized businesses have increased at a disproportionately higher rate than those of major taxpayers.
During the first nine months of the year, the 1,000 largest taxpayers paid 1 trillion 439 billion drams in taxes, representing an 8.7% increase compared to the previous year. In the same period, total budgetary tax revenues increased by 13.9%. This indicates that the primary burden of revenue growth has fallen on SMEs, highlighting a substantial increase in tax pressure. Consequently, companies outside the top taxpayer list experienced growth in tax payments at a rate 3.1 times higher than that of the largest taxpayers.
Specifically, while large taxpayers’ contributions increased by 8.7%, those of small and medium-sized businesses rose by 27%.
This pattern reflects the government’s fiscal policy toward SMEs, which has resulted in heightened tax pressure. As a consequence, thousands of SME representatives, unable to withstand the intensified fiscal burden, have been forced to close their businesses.
Hakob Kocharyan
