Hrazdan-Cement Controversy: Parliament passes bill to exempt debt-ridden factory from tax penalties

This week, a bill on cancellation of debts arising from a default on tax obligations of the Hrazdan-Cement CJSC, was passed by the National Assembly at its special session on Wednesday, sparking a debate on the “squander” of public coffers.

Eighty-six MPs voted in favor of the bill, with 8 voting against it and 9 abstaining. The bill, which was rejected only a few weeks before during a regular session, exempts the company from 510 million drams (more than $1 million) tax commitments.

According to Minister of Economy Artsvik Minasyan, by this decision, the government met the request of VTB Bank, the sole shareholder of the company. The latter had suggested exempting the company from tax penalties in order to rerun, equip and organize further activities of the factory.

“At times the media present the information inaccurately by saying that [we] are trying to exempt the company from taxes, while the plant is exempted from penalties for delaying to pay taxes. No other franchise is stipulated by this bill. This is a chance to not let the company go bankrupt, and to maintain 450 jobs,” the minister explained at the National Assembly earlier.

The former owner of the Hrazdan-Cement was Mikhail Bagdasarov, a well-known businessman, who previously mortgaged the company at VTB Bank, which later took the ownership of the company on account of the debt.

Earlier, during the debate on the bill, opposition MP Hrant Bagratyan said that it was Bagdasarov who must pay the penalties.

“Bagdasarov privatized the Savings Bank in 2003, then, two years later, he sold the same bank to the VTB for $30 million. As president of VTB, he issued himself a loan, and then did not pay it back. Now you’re also covering up that crime. The two governors of the Central Bank knew that such a loan must not be given, and, after all these, instead of forcing Bagdasarov to pay the debts and penalties, the government has undertaken that commitment,” said Bagratyan.

Speaking about Bagdasarov’s activities, political analyst Hakob Badalyan wrote in “The situation is really interesting, because Hrazdan-Cement is not Bagdasarov’s only property that has gone bankrupt. That was also the case with the national air carrier, Armavia, which used to maintain a monopolistic position [in Armenia’s civil aviation market].

A company with a monopoly position goes bankrupt and no one is held responsible for it, whereas the risks and consequences are actually taken by the state. The same is true in the case of Hrazdan-Cement. The question is what else Bagdasarov, an oligarch, who was once close with President Serzh Sargsyan, made bankrupt in Armenia and left the government, that is, taxpayers to suffer the consequences.”

It is noteworthy that during the April discussion over the bill, Republican MP Karen Karapetyan voted against it, saying that the country is at war, and the state is not obliged to regularly pay for every “bird of passage”.

“I think it’s not the state that should meet such people halfway, but our society must decide how to deal with this kind of people in such cases. And for that reason, these people must come, give an account and pay for their actions. Finally, it is enough: we should be able to learn a lesson from the April events. We should come to our senses: otherwise there will be others, who will come to their senses. It’s enough to build our own happiness at the expense of the blood of others’ children, our citizens. We should just stop,” said Karapetyan.