Guest Post: When politics influence economy

It is good to realize that the opposition finally came out with a platform and plan for economy change, stepping back from calls for revolution, vendetta, prisoning of guilty, etc.

BUT

I was reading ANC’s 100 steps on their website, and found that it does not even qualify to be a serious blog post. My first impression was, the person(s) who wrote this simply do not want power, as they showed in their 100 steps that they cannot manage it. (I had the same impression when recently A1+ forged their bid for TV license, and then blamed the Government for disqualifying them.)

My second impression, rather a question in my mind was, does this really differ from today’s Government platform? In many ways it was simply a repetition of what today’s Government plans to do. You know, those usual blah-blah-blahs with no precise timeframe or no measurable targets or those communist-like agendas.

But the overwhelming question in my mind, crossing every single paragraph I read like a red ribbon was – oh my God, who wrote this?? It appeared those 100 steps were written by a group of economists under scientific leadership of Hrant Bagratyan. I must confess I do respect him and I agree with some of his statements. But this documents is made for gathering people to Liberty Square rather than proposing a serious plan for economy reconstruction.

I read only first 26 points, called Tax and Customs Policy. I could not read the rest.

My general observations are:

Although the paper says that it reflects only general views, with no details, but we all know that the devil is in the details… The details, added later can literally change everything what’s there now.

It was clear that the paper could be 97 steps, 83 steps or 104 steps, but 100 steps sounds perfectly good. 100%.

The paper mentions coming 10-15 years, as if it says – we are gonna be in power for 2-3 presidential terms.

More detailed, again only main issues:

a) The main thing that gets your attention from the first paras – redistribution of wealth, i.e. taking a tax burden from SMEs and burdening big businesses with taxes.

Now few questions. Will big business support ANC after this? Forget it. Will big business do everything so current government stays in power? Yes, of course. And finally, who’s got the money today? Right, big business.

Taking burden from one and burdening the other is not the best policy one can offer.

b) I really do not know where to start. The para reads: “Bringing minimum salary closer to the size of average salary. For the coming 10-15 years the size of minimum salary should be brought closer to the average salary which would be an efficient mechanism for reducing specific weight of shade economy.”

It never mentions how much the minimum salary will be. So who cares? And I still do not understand why this was in Tax and Customs policy section.

c) Taxation of elite construction is offered, in the center of Yerevan it will be 15%. It means elite property in the center of Yerevan will be at least 15% higher in price. No comment, what can I say… This is done to get the bid sharks and make them pay taxes, but who will suffer at the end? Young families of course.

d) This one is funny: “For real estate property sold the second time an average tax of 5% for profit should be set”.

For the second time? Within a year? Two years? Seventeen years? Be cautious, do not sell your property for the second time during your life, even if you are 98 years old they will tax you, because when you were 24 you sold your 1-room apartment in Ijevan.

e) The paper is very political, being an economic paper it simply breaths politics, see: “Prohibition of profit tax prepayments. The faulty practice of making prepayment from the profit tax should be excluded. The taxpayer does not should credit the state. Especially as this principle has never worked with big taxpayers who as a rule are high ranking public officials.”

Leaving alone bad English, which serious economist will say the last sentence in presenting an economy reform plan? No, lets be honest.

f) The fairy tale: “VAT decrease; circulation tax application. VAT should be set at 18%. For separate products a classified (lower) VAT scheme should apply. Later, after carrying out certain work with EU and Russian Federation, VAT should be replaced with a 5-7% circulation tax. Later corporative taxation system should be implemented.”

When?? Remember I told you the devil is in the details. As this is not realistic, the ANC prefers not to put any (even soft) deadline there. But as political paper it should contain this para. And what does “certain work with EU and Russian Federation” mean?:)

So when you ask in the future – what’s with VAT? When will it become 5%? ANC will answer you, we carry out certain work with EU and Russian Federation, oh, and, we never told you any deadline.

g) This one is simply a catastrophe: “Special taxation of big landowners. Big landowners (50 hectares and more) should be taxed with the same regime as industry, trade etc. In this case the mechanism of harvest and income valuation should apply instead of land cadastral valuation.”

And if the land is a forest, or lake, the owner should still pay tax, or, cut the forest and “have harvest” to be able to pay taxes.
How do you valuate harvest? Let us suppose I decide not to plant anything for 20 years, as this is my own land, lake, etc. So I have no harvest. Why should I pay taxes based on your “harvest valuation” system?

h) The paper reads: “Casinos should be allocated separate areas in distant borderline areas; their presence in Yerevan, Gyumri and Vanadzor and recreation areas should be excluded.”

I was trying to see what is different form today’s policy.

i) And finally, this kills the last drop of hope: “Exclusion of tax remissions. No subject carrying out economic activity (funds, religious organizations, any charity) should have tax privileges.”

I am really sorry for all those numerous charity organizations as well as Armenian Diaspora helping our country as everything they do will soon be taxed. Congratulations.

Again, I read only first 26 steps of those 100 steps, called Tax and Customs policy. I hope you do understand why I could not continue.

I honestly want to witness strong and serious opposition in this country, as this is part of a formula for getting better, stronger, wealthier, happier, etc..

But unfortunately, this remains only a dream.

Guest post contributed by www.armenia.im

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42 thoughts on “Guest Post: When politics influence economy

  1. You are absolutely right!

    The ANC plan to improve the living conditions of the citizens and it’s unacceptable. How dare they imply that the oligarchy needs to be brought into the legal framework. They should be able to enjoy their earnings, big houses and Bentleys. They work hard to shelter from taxation.

    Also, the regular people should fend off for themselves and if necessary, migrate to Russia for a better living. They always have a choice.

    1. @nazarian
      migrate to hotac russia for better living? so depopulate the homeland?
      aysinqn diatapvenq/amayacnenq mer Hayastan? lav eli, gnanq urish yerkrnerum u ayntex aprenq yev asimilyacnenq. ayd amena lavn a, morrannq mer azg@ mer Hayutyan, arden te inch e n’shanakum Hay linel@, vochinch arden Hay linel@ urish azg e linel che? ari gnanq rus linenq, 100/100 tokos

  2. Guys, hello and thanks for your comments,

    The reason of analyzing these 100 steps is to make them better. And I did it for free, if not Armenia I would charge for every single minute I spent, believe me.

    Until today no one really looked at those 100 steps. Partly because no one cares, partly because ANC had no such policy published until one month ago, partly because people want revenge and blood, rather than serious economic policy discussions.

    Well, I am a little bit different. I do care. If this is gonna be our new economic policy – then I am sorry, I do not want that. It’s a shame to have such a policy after all these years of demands, rallies, political prisoners, victims. As much as it is a shame to have today’s Government’s approach.

    So what do you suggest? Silently accept whatever ANC offers or whatever Government offers? Without even trying to read it? Are we zombies or what?

    No, let us read, discuss, make it better.

    Thanks again

    http://www.armenia.im

    1. Well, I disagree with your notion that it sounds like a redistribution of wealth. You have to remember that most of the accumulated wealth in the hands of the oligarchy is illegal. The least of the issues is the tax evasion which was admitted by tsarukian’s mother in 2008.

      Another point is that countries like Armenia have neither the intellectual nor the economic potential to have large industries. To do so, they have to compete with the big boys in China or India. So the country needs to have niche industries which normally are medium sized enterprises.

      As far as the taxation for the large landowners goes, it’s a mechanism to create a disincentive for large corporate farms. Land is a precious commodity in Armenia and a large chunk of the population is small farmers. Take the land from them and give to a few oligarchs and you will end up with impoverished population that will have no choice but to migrate. At least now they are poor but do not starve. There are other mechanisms to enrich the small farmers.

    2. Also, I do not understand why you support tax prepayment. That’s the most absurd concept I have ever come across. It’s even more absurd than the concept of property tax.

      The only two acceptable tax frameworks, to me, are income and consumption taxes.

      1. thanks for your comment,

        yes, the wealth accumulated in the hands of oligarchs is illegal, including the wealth accumulated in the hands of those oligarchs that support ANC (for example Sukiasyans). But 100 steps do not speak about oligarchs, they speak about big business.
        100 steps do not talk about making the burden lighter, they talk about taking the burden from one and burdening another. Not the best policy.

        Instead of creating the mechanisms for making small enterprises medium, and making medium enterprises big, and making big enterprises regional, etc. the ANC kills the big enterprises to ease the burden of smaller ones. Just to answer your question about competing China and India, Skype was born in Estonia before it became world-known.

        I do not know what made you think I was for tax prepayment, I think you were not attentive while reading. My observation was about mixing politics with it.

        thanks again and all the best

        http://www.armenia.im

      2. re: Skype. That’s why I mentioned the intellectual potential. I do not think you can compare Armenia with Estonia as far as intellectual capacity exists. There is not much brain drain from Estonia but labor, both physical and intellectual, is the main export from Armenia.

          1. Once the immigration restrictions were eased in the 70-s the brain drain from the USSR started. And in the late 80-s the iron curtain came down so people were free to move out. The collapse of the USSR, the blockade and the war made it worse.

            The subsequent economic and political hardships have not improved the situation.

  3. I appreciate you calling attention to the document and your analysis of a portion of it. It’s important to have issues openly discussed and dissected, which is what is supposed to happen in a democracy. (Though I wonder how much critical inquiry takes place with the current government’s economic policy documents—ever seen them? And by the way, here is a February 2008 headline from Armenia Now from Serzh Sargsyan’s presidential platform: “PM for President offers a car in every family and medicine for all” – Is everyone enjoying their car and medicine??)

    However, you are taking as a finished product what the ANC clearly says is a proposal that is open for public discussion: “The Congress also welcomes proposals and observations from citizens, experts, public organizations, and political groups to perfect the proposal. Suggestions and comments may be sent to: Yerevan, Koryun 19A, 4th floor, as well as to economy@anc.am or posted as comments at http://www.anc.am.” So why not do so, and become a participant in democracy and have your voice heard? In my view, there is far too much shrugging, hand-wringing, and complaining going on about what “they” are doing, which I admit is easier than taking an active role, but the main problem in Armenia is exactly this—apathy—so here’s a chance to cast that off.

    As to your specific criticisms, I’m no economist, but here are a few thoughts: I don’t think that the ANC expects many oligarchs to support them—most who are actually living in Armenia are pretending to be Members of Parliament, and the rest rarely even visit. However, should the opposition actually gain control of the country, survivor instinct quickly kicks in and savvy businessmen know how to make compromises with whoever is in charge. The rest can move to their “second” homes in Glendale, Moscow or wherever. As to “shifting the tax burden,” that burden is the money that oligarchs really owe even now to the government and it is their duty to pay, which they are shirking, and since most are Members of Parliament, they are doing so with impunity. This non-payment of taxes and the monopolization of basic goods such as sugar is killing the country and forcing poverty and emigration.

    As to the proposed construction tax, how many buildings are sitting empty in Yerevan’s center, and how much needless destruction of affordable housing has taken place? Better to renovate existing buildings than to build too-high shoddy construction that is marketed not to young families but to Diasporans who buy only for the views of Mt. Ararat and may visit for two weeks in April. Your point d) is well-taken, it should have specified a time (perhaps within a year?), but a flip tax of reselling a property within a short period of time is very common practice in many countries, so it’s not a wild idea, but rather a serious one aimed to discourage speculation and instead encourage habitation. As to any similarities with current government policies (your casino comment, though actually it is different, since this proposal would protect ski resorts, for instance), no one says that everything must be 180 degrees different; a mature democracy can find points of similarity and ways to work together.

    Anyway, long enough comment. But please, take your opportunity to engage, rather than simply sigh cynically, if you are living in Armenia, because the situation is very much resembling a foreclosure sale, and there’s not much time to reverse the downhill slide. Way past time to have a few people milk the cow dry, isn’t it?

    1. Ani, appreciate your comment very much,

      Without going deep into those, I doubt ANC does not seek engagement of wealth and power into their agenda. Levon Ter-Petrosyan many times openly offered oligarchs and public figures to join their movement. And it is natural.

      I am far from politics, I have no knowledge to engage into political discussions, and 100 steps is very much a political paper. And yet, strange enough, being so much political, not a single word about foreign policy, Artsakh issue, etc..

      As for helping ANC, I think it is better to share thoughts with public rather than sending an email to ANC directly and basically hiding your thoughts from the rest. I believe this approach will make people analyze, discuss, correct, make offers, and finally polish and fine-tune the document.

      I live in Armenia and as I indeed value my time, I hope somebody else will take the second or third or other parts of the document and will analyze it.

      At least having comments like yours shows people are interested in analyzing the paper. And this is good.

      Thanks again

      http://www.armenia.im

      1. Thanks for writing it! Please understand I’m not criticizing your writing a blog post; Ditord’s blog is a great forum to generate thoughts and ideas. It’s just that your looking at the statement as a “done deal” only becomes such if there is no direct criticism, interest, or engagement from you and other readers who are not specialists or professionals. That is precisely what a “democracy” is: “a form of government in which all citizens have an equal say in the decisions that affect their lives.” Citizen engagement is the entire key to having a democracy. It takes effort and volunteering, and the rewards are indirect–not an upfront payment, but rather a better society. You can have opinions, everyone can sit and analyze the document, but if no one conveys their thoughts to those who are writing these documents, it will only lead to more frustration and apathy. As Observer knows, I’d like to see a real back-and-forth exchange of ideas between independent bloggers and the opposition leadership—any chance of this ever happening, Artur?

        As for your comment about the lack of foreign policy in this document, it focuses on socio-economic policy only, so that’s why foreign policy was excluded here. I suppose there will be a separate foreign policy document in the future, and maybe others as well. Despite its imperfections, this document is a start at looking at Armenian politics through policies, not personalities, so I hope there is a lot of serious discussion that will make its way somehow to those who wrote it.

        1. Ani jan, I am absolutely cool about your comment, what made you believe I took it as a criticism?

          My point about foreign policy was – instead of being purely socio-economic, the paper is too political, and yet, if one talks about politics he/she should not hide from political problems.

          Having said that, I do not believe ANC will publish anything about foreign policy. Or at least the publication will not have any tangible solution for Artsakh issue. It will mostly be demanding manifesto, having no precise deadlines, no clear targets, solving only part of the problem.

          Let us see, I am very interested.

        2. I don’t know…

          There was some talk about the possibility of bloggers meeting with some HAK leaders and than the conversation kind of died down.

          1. That sounds like the pro-komsomol tactics of Serj or the prime minister. I think this discussion that Armenia.im has started, and other discussions like this (if they ever happen) are a better method. I don’t know how much of these comments with trickle down to the HAK economists. I think the ideas circulated here do have some importance.

            Obviously, if the banditocracy remains in power any hope for positive change is futile.

          2. Nope, Nazarian, my entirely outsider non-Komsomol idea from months ago, before the bobblehead let’s-agree-to-agree version presented by Tigran Sargsyan. I had a dream…well, maybe it can be revived, who knows? Hate seeing good ideas maybe trickle down when you can just turn on the water tap.

  4. I absolutely disagree with the statements and the point of view of this blog entry because the analysis view the 100 steps from a wrong light.
    At first the 100 steps are not a draft proposal or something like that. So if we analyze them searching for timeframes, detailed explanations and so on of course we’ll come to a bad assessment.
    In my oppinion the main objective of the 100 steps is to show that the HAK, having a mature organization structure has in all necessary spheres (including the economic sphere) both the ideas and the human rescources to improve the situation in the country. Besides that Bagratyan’s 100 steps entail the detailed points of the Armenian economy where we nowadays find shortcomings and by that giving ideas for improvement (and with this indicating at the fact that the current authorities following own interrests fail to implement the improvmemts forthe society).
    Assessing the 100 steps from this point of view one can just come to a positive result because the points mentioned are generally well-conceived but of course not explained in detail.

    Moreover just think about what and who you are critizizing by your blog entry. The HAK is an opposition alliance

  5. hi Mikael,

    sorry i will be short, writing via phone.

    For me anything unacceptable should be pointed out. Be it opposition or government.

    Now. For me, taxing charity, adding property taxes, burdening anyone with taxes instead of someone else, and other similar ideas are unacceptable. Irrespective where it comes from.

  6. Mikael says:
    March 31, 2011 at 1:21 pm
    00  Rate This
    I absolutely disagree with the statements and the point of view of this blog entry because the analysis view the 100 steps from a wrong light.
    At first the 100 steps are not a draft proposal or something like that. So if we analyze them searching for timeframes, detailed explanations and so on of course we’ll come to a bad assessment.
    In my oppinion the main objective of the 100 steps is to show that the HAK, having a mature organization structure has in all necessary spheres (including the economic sphere) both the ideas and the human rescources to improve the situation in the country. Besides that Bagratyan’s 100 steps entail the detailed points of the Armenian economy where we nowadays find shortcomings and by that giving ideas for improvement (and with this indicating at the fact that the current authorities following own interrests fail to implement the improvmemts forthe society).
    Assessing the 100 steps from this point of view one can just come to a positives result because the points mentioned are generally well-conceived but of course not explained in detail.

    Moreover just think about what and who you are critizizing by your blog entry. The HAK is an opposition alliance which has very constrained financial rescources based on voluntary work. It is easy to critizize those working, actually it is a typycal Armenian quality. Instead we could contribute ourselves not only with assessments of work done by others but by work by ourselves to the change of power in Armenia.
    By the way there is just one oligarch supporting publicly the Opposition struggle, it’s Sukiasyan as you mentioned (not the Sukiasyans since there are not several oligarchs) and the latter a not unimportant part of his business due to his decision to support the opposition.

    Finally your hint that the 100 steps are in bad English seems just ridiculous because it just shows the way you approach to Bagratyan’s paper. Moreover your assessment of A1 ‘s bid at the last tender is really disappointing and sad. The accusation that A1 have forged its bid shows a lack of knowledge and wrong research of the issue. Independent of that you can’t connect A1 ‘s issue with a good or bad opposition work because the one has nothing to do with the other.

    The Diaspora can be an important factor for change in Armenia. But for this it is necessary to absolutely support the Armenian opposition and change actively.

  7. thanks for your opinion.
    I think i have provided mine above. I am not going to explain that Sukiasyans are family, that A1+ has no capacity to participate in tenders, that taxing charity kills Diaspora, that I have already helped HAK with this post, etc..
    I wish you all the best. And thanks again for not being indifferent.

    1. I just looked and it says “This Account has been suspended” – very different from “disappearing.” Perhaps the government did it, since it has a .am domain, or perhaps it is under a hacker attack. Why not find out what happened before making your negative assumption?

        1. Oh, Ani

          Why do you jump into conclusion about government instead of just saying the website indeed disappeared? Why so biased? How many times did you see current Armenian government blocking ANY website?

          Now, it doesn’t matter if your site is with .am or .im as soon as you host it abroad. And one can host .am website in USA as well.

          Usually “account suspended” is when you do not pay for your services. And I indeed do not care about the reason. All I know is ANC visitors could not access the website because it has disappeared. So why do I blame government??

          Please be independent and try to understand that sometimes ANC manages it’s own website and ANC should be asked the questions about it’s own website, but not the government.

          Now, who told you I did not ask ANC guys about the reasons? What makes you jump into that conclusion?

          1. I was very surprised to read it had disappeared, but then saw that that wasn’t the case–your terminology was misleading and you gave no details or mentioned that you had done anything more than try to click on it, so to infer from that “they aren’t serious” seemed quite a leap without benefit of inquiry. So what was the reason the ANC people gave you for its suspension, which was apparently only for a few hours?

  8. @Ani,

    What surprises you if someone says the site disappeared, when the site indeed disappeared. And not for few hours but for the whole day.

    Did you expect to see the message “the site has disappeared”, instead of “the account has been suspended” to claim that the site has disappeared?

    I still wait for the answer from my ANC friends, some of them just told me “it’s a shame” but everyone can make mistakes. I honestly expect to find excuses or answers on the very website, but I doubt ANC will say anything about that.

    1. No, when you said “site has disappeared,” I expected to see an open DNS, a broken link situation, or a failure to load anything. And those things happen quite often when I try to load Armenian sites, sometimes they just spin and won’t load. Anyway, glad to see it’s back up so people can view it.

    2. Oh yeah, and about “being serious”.

      Serious guys would care about their visitors, and would at least explain the reason of disappearing for the whole day on that very website. I am not even saying about asking for understanding and bringing excuses.

      This is what makes me claim they are not serious about their own movement, as hundreds of visitors try to gain info via their website. The guys are not provided with a TV channel, so one needs to understand that the website becomes the only method for broadcasting , but alas….. to me these guys are too “old-school” thinkers.

      Wanna talk about that?

      1. Sorry, but it’s really hard to beat this for “old-school” thinking – the Republican Party of Armenia hasn’t updated its Soviet-style website since 2007, and still lists Sargsyan as a candidate for President :)) http://hhk.am/eng/index.php?page=program (bonus: click on “Party News” under “Activity”–so much going on!)
        Unlike the ANC, which is strapped for cash and depends to a very large extent on unpaid volunteers, I don’t think the ruling party website suffers from lack of funding, so I guess there will never be a problem with this site going offline–and apparently it has reached perfection…

          1. Whenever people can not argue they try to bring a worse example.

            I was trying to find where I talked about Serj Sargsyan during this long conversation with you, but I could not. Why do you talk about Serj Sagsyan? Do we talk about him here? Or Republican Party?

            We talk about ANC, and failures or disappearing of Serj Sargsyan have nothing to do with it. I was hopping I am talking to a person who
            can talk about the topic we discuss. But not about other people, other parties, other websites.

            I could say this is funny, but it is not even funny. Why do no you talk about Gagik Tsarukyan, and his party and their website, or other parties that are in government today? What do they have to do with these 100 steps or disappearing of ANC website for a day?

            Whenever people can not answer a question, they bring another, worse examples. I am so disappointed.

          2. I was using the ruling party as context, since you are saying that the opposition isn’t serious, why not give some context and say “compared to what?” since these are the folks in power, after all. I think the ANC website could stand improvement, but who will pay for it? The Heritage website, by the way, is not much better, take a look—the most prominent feature is a donation solicitation. I guess Prosperous Armenia’s website is better if you like a giant Gagik Tsarukyan gazing down at you…

            And with further regard to your comment about the opposition not being serious, I’ve found that people who are followed, surveilled, investigated, thrown in jail on false charges, have their families threatened, have been beaten, have their property confiscated, lose their jobs, etc. for being oppositionists tend to be a lot more serious in their convictions than those who stick their finger up to see which way the wind is blowing and follow that direction. So by all means constructively criticize, but do it by comparing platforms, ideas, and programs, though you’ll be hard-pressed to find any such documentation from the ruling regime. And somehow, find a way to become a “we” instead of a “they,” because it’s all those “theys” tut-tutting on the sidelines that really doom a country.

  9. @Ani,

    Disappointing more and more, I was trying to follow you on twitter, since I thought you are balanced, but….

    If you wanted to ask: “compared to what” – then why do not you ask it?
    Why do you again jump and start comparing ANC with those who are worse, to prove that ANC is brilliant?

    Do not you see in my original post that I mentioned, that government sucks? Or those government-related words immediately erase in memory and they do not count, once you see I criticize ANC as well? Were you the one praising democracy?

    ANC is very unserious, extremely amateur, and I talk about ANC. They neither behave as opposition nor they qualify to be a serious opposition. And again, compared to any serious oppositional party o movement in any European country.

    Now, if you want to talk about Serj Sargsyan, Republican Party, Heritage party, Gagik Tsarukyan, and others – you can talk about that as much as you want, but this does not make ANC brilliant.

    Wishing you all the best in all your endeavors

    1. When did I say ANC was brilliant? I want to see more emphasis from them on social and civic issues, for instance, and a greater spectrum of voices represented, particularly women and people younger than 40. (btw, I can’t think of a political organization in the world that I really think is brilliant, most certainly not the Democratic Party in the U.S.) But the ANC have managed, against the odds and despite everything, in the past three years to build an organization that is far closer to a true opposition than any other ex-Soviet country (even including Georgia), even without any representation whatsoever in the Parliament, and they shouldn’t be belittled for that. And a few hours’ downtime on their website is not the huge problem in the scheme of things that you are making it out to be. As for the other parties’ websites, you just asked me what I thought about them.
      If you have followed me on Twitter, then you know I compare things and places all the time–I am analogy-based ;)

  10. armenia.im,
    I am glad there are people like you who try to analyse this platform, point by point. Unfotunately, ANC followers have been so filled with hate towards their government that they are not able to rationally and calmly analyze things — as you can see here.

  11. Thank you so much Mike.

    You are right, hatred clouds your mind, takes over your thoughts and emotions and obviously hatred is not the best feature to start any demand, any platform, any project or any dialog with.

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