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NO NEED TO BE AFRAID OF OLIGARCHS
Naira Hayrumyan
Story from Lragir.am News:
http://www.lragir.am/engsrc/economy24152.html
Published: 14:12:15 - 10/11/2011
Prime Minister Tigran Sargsyan once said that they do not fight the
oligarchs but oligopolies. At the same time, he did not go into details
of what characterizes the oligopoly and what addressed measures are
taken up in the framework of the "fight" against the oligopolies.
In the meantime, there are several fundamental points which are well
visible even to a non-economist. The main platform of existence of
oligopolies is the fusion of the government and business, as well as
the lack of mechanisms of control and taxation of super profits.
Oligarchs become such because they have governmental privileges and
no one counts their profits. Say, in Armenia there is no "roof"
of profits, beyond which, profit is considered super profit. In
principle, even the Anti-monopoly Commission has no right to prohibit
the importing monopolists to impose a 200-interest margin on the
imported goods. That is, the importer decides how much profit he will
receive from the product and how many "commission charges" they can
add to its cost.
This is of course the law of the free trade economy, but in
normal countries, a law on super profits operates where the "roof
of commission charges" is defined. In some countries it is 13%, in
others up to 20-25% and if the importer sells their goods which is
above its cost + specific rate, then it qualifies as super profit
and subjects to huge taxes.
In Armenia, there is no similar law, and it is neither planned in the
proposed tax amendments. In the meantime, as the famous businesswoman
Silva Hambarzumyan stated, one ton of high-quality sugar is about
USD 480 on the world market, and its import to Armenia together with
the customs clearance costs should cost to the importer a maximum
of USD 100-120. So, they pay 600 dollars per ton, and with the most
basic mathematical calculation, it can be understood that a kilogram
of sugar of the highest quality should cost a maximum of USD 0.7 in
Armenia. Now third-grade sugar is sold in the country at USD 1.3,
she said, noting that there is actually a 100 percent markup.
Instead of directing all the efforts to the elimination of this
"manhole" with the help of which oligarchs manage to disproportionately
raise prices, not pay taxes and deepen the social polarization,
the government is going to set taxes on luxury. This tax, of course,
will help fill the state treasury, but the owners of expensive cars
will eventually find a way to avoid this tax. While, the introduction
of taxes on super profit can change the philosophy of the economic
policy, which is not based on the promotion of enrichment of a group
of oligarchs.
It is understandable that oligarchs who are not limited by laws can
endlessly raise the prices hence devouring all the income of the
population. This means that the population will not have free means
to invest in their own business. Since the government sates that it
is determined to form a middle class, then it is obliged to create
equal competition conditions. Without the law on super profits,
it makes no sense to dwell on such conditions.
Only two circumstances can hold the authorities back from making
this step: if it is an oligarch too and gets super profits, and if
it is afraid of "resistance to oligarchs". No worth being afraid
of oligarchs. They understand that their time came and now they will
either have to find new rules of the same or wait for the restructuring
of property. For this, the fight of the government with itself comes
to the first plane. Is the power able to put itself in frames?
Naira Hayrumyan
Story from Lragir.am News:
http://www.lragir.am/engsrc/economy24152.html
Published: 14:12:15 - 10/11/2011
Prime Minister Tigran Sargsyan once said that they do not fight the
oligarchs but oligopolies. At the same time, he did not go into details
of what characterizes the oligopoly and what addressed measures are
taken up in the framework of the "fight" against the oligopolies.
In the meantime, there are several fundamental points which are well
visible even to a non-economist. The main platform of existence of
oligopolies is the fusion of the government and business, as well as
the lack of mechanisms of control and taxation of super profits.
Oligarchs become such because they have governmental privileges and
no one counts their profits. Say, in Armenia there is no "roof"
of profits, beyond which, profit is considered super profit. In
principle, even the Anti-monopoly Commission has no right to prohibit
the importing monopolists to impose a 200-interest margin on the
imported goods. That is, the importer decides how much profit he will
receive from the product and how many "commission charges" they can
add to its cost.
This is of course the law of the free trade economy, but in
normal countries, a law on super profits operates where the "roof
of commission charges" is defined. In some countries it is 13%, in
others up to 20-25% and if the importer sells their goods which is
above its cost + specific rate, then it qualifies as super profit
and subjects to huge taxes.
In Armenia, there is no similar law, and it is neither planned in the
proposed tax amendments. In the meantime, as the famous businesswoman
Silva Hambarzumyan stated, one ton of high-quality sugar is about
USD 480 on the world market, and its import to Armenia together with
the customs clearance costs should cost to the importer a maximum
of USD 100-120. So, they pay 600 dollars per ton, and with the most
basic mathematical calculation, it can be understood that a kilogram
of sugar of the highest quality should cost a maximum of USD 0.7 in
Armenia. Now third-grade sugar is sold in the country at USD 1.3,
she said, noting that there is actually a 100 percent markup.
Instead of directing all the efforts to the elimination of this
"manhole" with the help of which oligarchs manage to disproportionately
raise prices, not pay taxes and deepen the social polarization,
the government is going to set taxes on luxury. This tax, of course,
will help fill the state treasury, but the owners of expensive cars
will eventually find a way to avoid this tax. While, the introduction
of taxes on super profit can change the philosophy of the economic
policy, which is not based on the promotion of enrichment of a group
of oligarchs.
It is understandable that oligarchs who are not limited by laws can
endlessly raise the prices hence devouring all the income of the
population. This means that the population will not have free means
to invest in their own business. Since the government sates that it
is determined to form a middle class, then it is obliged to create
equal competition conditions. Without the law on super profits,
it makes no sense to dwell on such conditions.
Only two circumstances can hold the authorities back from making
this step: if it is an oligarch too and gets super profits, and if
it is afraid of "resistance to oligarchs". No worth being afraid
of oligarchs. They understand that their time came and now they will
either have to find new rules of the same or wait for the restructuring
of property. For this, the fight of the government with itself comes
to the first plane. Is the power able to put itself in frames?