Good News: Artsakh's State Budget Revenues to Increase by Approximately 5 Billion Drams

The President of Artsakh's "Free Homeland" party, Arayik Harutyunyan, has released an extensive statement announcing that the Republic of Artsakh's 2019 state budget revenues will increase by approximately 5 billion drams.

Below is the full statement: "A few days ago, the National Assembly of Artsakh adopted a draft law initiated by the deputy of the 'Movement-88' faction, Edward Aghabekyan, regarding amendments to the law on 'The Subsurface of the Republic of Artsakh,' which removes the tax privileges established for the activities of 'Base Metals' mining company, and as a result, state budget revenues will increase by an additional 5 billion drams next year.

This news is indeed joyful, as the government will have greater opportunities to resolve numerous socio-economic issues in our republic. However, it is notable that certain political forces have had divergent opinions on this topic...

Since I, as the Prime Minister of the Republic, negotiated with the aforementioned company in 2013, and since the legislative initiative was proposed by the government, I would like to address the background of all this to ensure there are no unanswered questions.

In 2012-2013, it became clear that the deposits of the Drmbon gold mine were running out earlier than expected, and the government faced the challenge of urgently addressing the employment of more than 1,000 workers involved in 'Base Metals,' as well as compensating for the tax revenues paid by the company to the state budget.

The preferred option was the operation of the Kashen copper mine in the same subregion, where research work had begun during the Soviet era but had not been completed. Based on existing documents, 'Base Metals' completed the exploration of the mine, and discussions began regarding its operation with a positive conclusion.

As a result, the government provided a loan of $100 million to the company under favorable conditions and built infrastructure in the area worth approximately $20 million. Within the scope of these works, the state constructed the Sotk-Haterk-Kashen high-voltage overhead line and installed a powerful substation to address the electricity supply issue, while a significant portion of the water from the Khachen reservoir was provided to the company, leaving large areas of land uncultivated, as there was no other option for mining operations while maintaining thousands of jobs and creating new ones.

The next demand from 'Base Metals' was focused on tax privileges to ease the loan burden. According to the proposed plan, the company was to extract and process 1.8 million tons of ore per year. We agreed that a 6-year tax privilege would be granted for loan repayment, or more precisely, a 3+3 year tax exemption. That is, at the time of negotiations, the anticipated revenue amount from the company, given current prices and the proposed volumes, corresponded to 6 years; however, if the company's profit achieved the necessary financial resources before the designated period in the second three-year period, the established exemption should then be terminated. I must say that since the operation of the Kashen mine, the company has been increasing its extraction volumes annually, and in 2018, 'Base Metals' processed about 6 million tons of ore.

Thus, we can state that, first, the volume of processing previously agreed upon by the government and the company for loan servicing has long been exceeded. Second, in recent years, international copper prices have been higher than they were during negotiations. As for establishing tax privileges for additional investments made by the company for increased extraction, I would like to mention that there was no initial agreement on that matter. In other words, in that case, the company would have to invest from either its own or attracted resources.

Therefore, with the adoption of the aforementioned law, the government has not violated any agreements, and the overwhelming majority of the 'Homeland' faction deputies voted in favor of the bill, taking this reality into account.

Regarding the concerns that the adoption of the bill may hinder the company's further development, I disagree. 'Base Metals,' apart from obtaining additional profits due to large extraction volumes and high copper prices, has also proven, over the years, that it has an experienced management system, the exemplary management reputation of which has long been known not only in the region but also among reputable companies abroad. The company is a reliable partner, and I am confident that a long-term fruitful collaboration is expected with it.

P.S. By the way, at the end of the year, at the suggestion of the Government, the Parliament also made amendments to the 'Profit Tax Law' of the Republic of Artsakh, whereby the profit tax for electricity production companies in the hydropower sector has also increased by the same amount—from 10% to 20%. It is interesting to note: what is the difference, why did these political forces not mention anything about this..."