Economy 16:30 28/04/2023 Armenia

Economist explains sharp decline in taxes paid by ZCMC this year

Armenia's State Revenue Committee (SRC) on Thursday unveiled the amount of taxes paid by the country’s 1000 largest taxpayers in the first quarter of 2023. According to the data, the Zangezur Copper Molybdenum Combine (ZCMC) paid 15.49 billion drams in taxes in January-March 2023, down by 19.96 billion drams or 56.31% from the taxes paid in 2022 which amounted to 35.4 billion drams. talked to the head of platform, Associate Professor at the Armenian State University of Economy Aghasi Tavadyan to find out the reasons for the sharp decline in tax payments. How would you explain the dramatic decline in taxes paid by ZCMC to the state budget in January-March 2023?

Aghasi Tavadyan: We should understand first of all that the taxes paid by ZCMC hiked in 2022. The figures of 2021 and 2022 reveal that the ZCMC’s tax payments increased about threefold, from 48.8 billion drams to 143.9 billion drams. Not only did the taxes of ZCMC, but also those of Agarak Copper Molybdenum Combine grew by about 5 times.

This is attributed to the fact that from November 4, 2021 to January 1, 2023, the Armenian government imposed an export duty of 160,000 drams per ton of raw ore, except for the EAEU countries. The export duty of 800,000 drams for molybdenum concentrate also came into force. Taking into account that 478,000 tons of copper ore and concentrate, as well as 9,600 tons of molybdenum concentrate were exported from Armenia during that period, the taxes paid totaled to 90 billion drams, which amounted to about 5-6% of the country’s total tax revenues in 2022.

No increase in the exports of ore and concentrate was registered in 2022 due to this duty. While in previous years there was a rather high growth rate, which was facilitated by a twofold increase in global copper prices, there was no growth at all in 2022.

In 2022, molybdenum exports to the Russian Federation were recorded as it was excluded from the list of duties. Exports of processed copper were also recorded, which is remarkable, as previously Armenia did not export refined unprocessed copper bars to other countries. Why was the export duty on crude ore lifted?

Aghasi Tavadyan: The move was more politically motivated, since ZCMC first granted 15% of its stake, then another 6.8% (overall 23%) to the Armenian government under this duty. In other words, the Armenian government gained about a quarter of ZCMC’s stake and after that the duty was lifted. That’s why the taxes paid by ZCMC tripled in 2022 and decreased in the first quarter of 2023.

Incidentally, at the latest government meeting, Prime Minister Nikol Pashinyan stated that Armenia’s tax collections surged due to value added tax in 2022. It turned out that the record increase of 21.4% in tax revenues was also conditioned by an increase in taxes paid by ZCMC. Consequently, such a growth cannot be expected in 2023.

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