Why New Cash Registers Were Sold at Nearly 70% Above Cost: What Is the Connection with Karen Karapetyan and Vardan Harutyunyan

On February 5, the government announced that new generation cash registers would be sold for 60,000 AMD instead of 160,000 AMD. According to the government, the state would subsidize the 100,000 AMD difference. However, according to the State Revenue Committee (SRC), the previous price of 160,000 AMD was nearly the actual cost of the device, writes Hetq.am.

However, Hetq has found that the actual cost of the new model cash registers is around 90,000 AMD.

"We have also determined that these cash registers were purchased from a Chinese company whose representatives in Armenia are linked to the close circles of Prime Minister Karen Karapetyan and former SRC head Vardan Harutyunyan. It was during their tenure that the price of the cash registers was set at nearly 70% above cost.

The SRC is keeping the purchasing contracts for the cash registers secret.

According to the new tax code, all businesses were required to acquire new cash registers by January 1, 2019. A selling price of 160,000 AMD was set for all taxpayers by a decree from former SRC president Vardan Harutyunyan in early 2018.

This means that throughout 2018, cash registers had already been sold at 160,000 AMD to those businesses that were required to have new generation cash registers based on their 2017 revenues, and from January 1, 2019, they were mandatory for all taxpayers.

The price of cash registers decreased for businesses on February 5, 2019, after a meeting between SRC president Davit Ananyan and Prime Minister Nikol Pashinyan. On the same day, SRC president Davit Ananyan signed an order to set the selling price of new generation cash registers at 60,000 AMD.

Prior to his order to reduce the price to 60,000 AMD, Davit Ananyan mentioned in an interview with media that the 160,000 AMD set by the former SRC president, Vardan Harutyunyan, was nearly the cost of the device.

"The machine, which was imported, has a cost of 158,000 AMD, and the selling price was set at 160,000 AMD by the decision of the SRC president, nearly as much as its cost," said Davit Ananyan.

That 160,000 AMD was nearly the cost of the device was also posted on the SRC's website before their price was reduced to 60,000 AMD.

At the "Yerevan Trade Fair," we inquired to find out what model devices businesses had purchased in January 2019. It turned out that they had bought the new generation cash registers of the "PAX S900" model.

Hetq received information from the State Revenue Committee that the "PAX S900" cash registers were imported from the Chinese company "PAX Technology." We asked for the cost of the device, but the SRC did not provide a specific price for the "PAX S900," mentioning a price range of 110,247 AMD to 150,445 AMD.

Hetq approached the SRC for obtaining the contracts for the acquisition of the new generation cash registers. However, the committee refused to disclose this information, stating that the supplier selection and procurement processes were determined by confidential government decisions and are subject to non-disclosure.

The SRC considers the state procurement contract to be non-disclosable information. We had suggested to the SRC to provide the contracts by redacting any commercially sensitive information, but even in this case, the tax body did not provide the procurement contracts for the cash registers.

It should be noted that many contracts between various state bodies and foreign companies are published in the procurement accountability system (armeps.am) of the Ministry of Finance and are not kept secret.

A Georgian businessman helped clarify the cost of the device.

Hetq wrote a letter to the head office of the Chinese company "PAX Technology" on behalf of the Georgian businessman, indicating that they want to import these devices directly from the company and requested the cost of the "PAX S900."

The company first clarified how many cash registers the Georgian businessman wanted to import, stating that "the price depends on the quantity." In our response, we indicated a small batch of 150-200 pieces, and it turned out that the price in this case is 185 US dollars (about 90,000 AMD).

The company also confirmed that the price includes transportation costs.

It should be noted that the SRC's "Cash Register Implementation Office" imported these devices in a larger quantity and could certainly have purchased them for less than 185 USD in the case of a public procurement.

After this correspondence with the company, we are left to infer that the SRC is not disclosing the contracts to hide the actual acquisition price of the device.

The government is not actually providing a subsidy.

After the announcement of the price of new generation cash registers of 60,000 AMD, Prime Minister Nikol Pashinyan and Davit Ananyan stated on the government's official Facebook page that the remaining 100,000 AMD of the device's value would be subsidized by the "state."

The announcement also mentioned that businesses that had already bought cash registers for 160,000 AMD in January would receive a refund of the 100,000 AMD they had paid.

However, there was no government decision which would substantiate the allocation of the aforementioned 100,000 AMD subsidy from the state budget.

Hetq asked SRC president Davit Ananyan in writing, what legal act was the basis for the subsidy. Additionally, we also inquired about where the funds for the subsidy would be sourced from.

The SRC's response, which we received from the committee's information and public relations department, contradicts the government's response. According to the SRC, there is "no need for additional subsidies" since the funds for purchasing the cash registers were fully paid to the suppliers.

It turns out that the 100,000 AMD in the price of the devices was not subsidized, as claimed by the government. If the total amount has already been paid to the suppliers, it means that by selling them for 160,000 AMD, the SRC's "Cash Register Implementation Office" was not covering its expenses but rather ensuring additional profit. It is assumed that the SRC reduced the price based on previously accumulated profit or that the "PAX" devices were imported at the 60,000 AMD price (the company gives discounts for bulk purchases).

The cash register purchase contracts will formally establish how much profit the "Cash Register Implementation Office" operating under the SRC has made from the sale of the devices to date. It might become clear that businesses do not even need to pay that 60,000 AMD.

However, to calculate all this, we need clear data on the quantity and price of the acquired devices; these data, for us, can only be substantiated by the secret contracts.

Hetq has sent a request to the government in order to obtain the cash register procurement contracts through the executive branch.

The representative of the Chinese company supplying the cash registers is linked to the close associates of Karen Karapetyan and Vardan Harutyunyan.

The new batch of cash registers, the "PAX S900" devices, as noted, were purchased from the Chinese company "PAX Technology."

The State Revenue Committee assures that the immediate importer of the devices is the "Cash Register Implementation Office," but as long as we do not have the contracts, we cannot assert that the Armenian representatives of this Chinese company acted solely as intermediaries in the purchasing process or were party to the contract.

Especially when we find that those representative companies ("Smart Solutions" and "Torpayis" LLC) are linked to the close associates and partners of former Prime Minister Karen Karapetyan and former SRC president Vardan Harutyunyan.

It was during the tenure of Karen Karapetyan and Vardan Harutyunyan that the SRC was allowed to purchase cash registers from "PAX Technology" and sell them for 160,000 AMD.

"Smart Solutions" is currently engaged in servicing the cash registers in Yerevan, while "Torpayis" is active in the Shirak Region. Other companies have also received the right to provide service for the new generation cash registers from the SRC, but businesses we spoke to in Yerevan said that when they went to the SRC in January to buy cash registers, they were directed to sign a service agreement with "Smart Solutions" for 1,200 AMD per month," the publication writes.

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Photo: Hetq