In 2014, the Armenian Parliament passed a law on tax exemption for activities carried out in border rural communities, which was supposed to encourage economic activity in the border regions and thereby ensure proportional economic development.
The government also established a list of rural communities that would benefit from the privileges given to communities located directly under the enemy fire. It was also decided to provide social assistance to 37 settlements in four provinces (Ararat, Tavush, Gegharkunik, Vayots Dzor). A procedure was set out for partial reimbursement of natural gas, electricity, irrigation water tariffs, and property tax and land tax.
The Fact Investigation Platform tried to reveal what impact the law had during six years, and whether large businesses took advantage of it, what investments were made and how many jobs were created in the border areas.
Ministry Of Economy is only aware of Tavush Textile LLC that created 555 jobs
The Ministry of Economy could not say for sure what investments were made in these border communities using the tax privileges.
However, at the same time, in response to Fip.am’s inquiry, the ministry said that among companies operating in the region Tavush Textile LLC had applied to the RA Government for a tax exemption and a VAT extension of 3 years. “The company has invested 1.74 billion AMD and created 555 jobs within the framework of the project. The company is engaged in the production of workers’ gloves” reads the letter.
To what extent have investors been interested in business tax-exempt border communities?
We also tried to find out from the regional administrations what investments were made during these years.
The list of communities receiving social assistance in Ararat province includes Yeraskh, Paruyr Sevak communities and Tigranashen settlement.
According to a letter from Paruyr Sevak community, 9 investment projects have been implemented in Paruyr Sevak and Tigranashen settlements related to planting 5-12 hectares of orchards. It is noted that the main investments have been made in the agricultural sector, as subsidizing 50% of irrigation water value and attracting interest-free credit means stimulate investment in the sector, especially in small and medium-sized enterprises. “During this period, 45-50 seasonal jobs have been created” says the community leader.
Yeraskh border town reports that individual entrepreneurs have expanded their businesses. “Two fast-food restaurants and 1 wine, vodka and brandy tasting room, as well as orchards of about 71.4 ha with drip irrigation and hail protection network have been added in the Yeraskh community. As a result of these economic activities, 50 permanent and 200-300 seasonal jobs have been created. During 2018, a candle production business was established in Yeraskh community, which provided 3-4 more jobs” says a letter from the community.
The community from Vayots Dzor Province that has been granted the privileges is Zaritap, which has 4 border settlements: Sers, Bardzruni, Khndzorut and Nor Aznaberd. According to the regional administration office, no investment projects were implemented and no jobs were created in the border settlements after they were granted the privileges in 2014.
In Gegharkunik Province, Chambarak and Vahan settlements can benefit from the Law on Tax Exemption for Activities Carried out in Rural Border Communities, and here businesses are exempt from taxes. According to a letter from the Chambarak community, no investment projects have been implemented in the settlements so far.
Most of the communities that have been granted the privilege (28) are in Tavush Province.
The letter from Tavush regional administration notes that such information has not been collected, but it is known that numerous investment projects have been implemented in the border communities and settlements of the province.
According to the report, agriculture is one of the priority areas established by the strategy of the province, where projects have been launched in recent years by local and international organizations as well as individual investors, namely, establishment of greenhouses, fruit drying and refrigerator businesses, orchards, processing plants and textile industries. “The number of these enterprises already exceeds 200 with more than 1200 jobs, the largest of which are Tavush Textile LLC, Berdavan Wine Factory OJSC, EKODAKEN LLC and others. All of the above mentioned organizations have development potential, in particular, Tavush Textile LLC will expand its business by establishing a new workshop in Paravakar by 2020, where about 200 Tavush residents will work” reads the response.
Thus, it turns out that since 2014, around 1250 permanent, 300-350 seasonal jobs have been created in 37 border settlements that have been exempted from taxes, and according to the Tavush regional administration, another 200 jobs will be created this year.