Over 476 Million Dram in Damages Due to the Operation of the Tsaghkadzor Ropeway

The Investigation Division of the Republic of Armenia’s Prosecutor General's Office has uncovered that the assets of the Tsaghkadzor Ropeway were transferred under the decision No. 679-A of the Armenian Government dated April 22, 2004. This decision separated the first, second, and third stations of the Ropeway from the assets of the ‘Tsaghkadzor Main Sports Complex’ LLC and handed them over to the State Committee of Physical Culture and Sports of the Republic of Armenia, which subsequently donated the property to the legal entity ‘National Olympic Committee of Armenia’ (NOCA) under the condition that the Ropeway be reconstructed and operated by this entity or its affiliated commercial organizations until December 31, 2005.

Following the reconstruction, the NOCA signed a management agreement on March 1, 2005, granting the Ropeway's management to a limited liability company from 2005 to 2008, and then to another limited liability company under a contract signed on December 15, 2008, which continues to this day.

According to tax data presented by the companies operating the Ropeway from 2005 to 2017, the Ropeway’s annual turnover ranged from 3 to 60 million dram, totaling approximately 496 million dram over the specified years. However, in 2018 alone, the turnover reached 537 million dram, exceeding by around 40 million dram the combined total of the previous twelve years.

The taxes paid during this period amounted to an annual total of 1 to 20 million dram, making an approximate total of 148 million dram. Conversely, in 2018 alone, about 240 million dram in taxes were paid, representing an excess of around 90 million dram compared to the previous twelve years.

The studies also revealed that the annual electricity consumption of the Ropeway from 2005 to 2018 remained consistent, with deviations not exceeding 25 percent. For example, in 2018, with a turnover of 537 million dram and taxes of approximately 240 million dram, the Ropeway consumed 615,430 kWh of electricity, which is less than the consumption in 2008, when the turnover was only 56 million dram with around 17 million dram in taxes paid and electricity consumption of 657,574 kWh.

Furthermore, it was established that the Ropeway operated solely in the presence of passengers.

Based on information obtained from the Investigation and Operational Intelligence Department of the State Revenue Committee and an initial assessment of damages caused to the state, there was a significant underreporting of income from services rendered in the tax declarations submitted from 2008 to 2016. Specifically, there was a shortfall of 1 billion 985 million 273 thousand dram in taxable income and a hidden profit of around 397 million 054 thousand dram, resulting in a calculated shortfall of profit tax of 79 million 410 thousand dram.

Additionally, VAT amounts required to be paid to the budget, according to the VAT Law in force during the establishment of the legal relationship from 2008 to 2016, were not reported, amounting to 397 million 054 thousand dram.

As a result of unpaid taxes, the total damage caused to the state is around 476 million 465 thousand dram, of which 397 million 054 thousand dram pertains to VAT and 79 million 410 thousand dram to profit tax.

Moreover, according to the management agreement signed between the NOCA and the company operating the Ropeway on December 15, 2008, the NOCA is entitled to 50 percent of the net profit generated from the use of the Ropeway, while the remaining 50 percent goes to the operating organization.

Taking into account the underreported taxable objects (profits) of about 397 million 054 thousand dram, at least 198 million 527 thousand dram of the corresponding 50 percent has also been inadequately transferred to the NOCA by the responsible individuals of the company, causing significant financial losses to the NOCA.

Based on the findings, a criminal case has been initiated under Article 205 (part 2) of the RA Criminal Code for the malicious evasion of payment of taxes, duties, or other mandatory payments in particularly large amounts, as well as under Article 184 (part 2, item 1) for causing significant damage to the owner or other legitimate possessor through deception or abuse of trust, which has been assigned to the investigative department of the State Revenue Committee for further inquiry.