In Armenia, CIPE is currently sponsoring a program designed to mobilize the business community to advocate for reforms that will improve the business climate. To this end, quarterly roundtables are held between members of parliament and other government officials, and businessmen. These efforts have successfully clarified and streamlined laws in two areas -- inspections and taxes -- thereby reducing transaction costs and opportunities for corruption.

Previously, Armenian entrepreneurs were plagued by frequent, arbitrary inspections from an overwhelming number of government agencies whose employees often conducted inspections in order to extract payoffs, and by complicated tax laws.

New Law on Inspections of Private Businesses

On May 17, 2000 President Kocharian signed a new law (no. 010.0060) on inspections. The law regulates the government bodies that can inspect commercial and non-commercial businesses. The major features of the law are:

• Only 19 specific governmental agencies are authorized to perform inspections.
• The law regulates the subject matter, timing, and reason for inspections.
• It specifies the governmental agencies that can make secondary inspections.
• In the majority of cases, with the exception of criminal issues, the inspection agencies are authorized to conduct only one inspection of a business per year.
• The private business has the right to invite its own experts (such as attorneys, auditors, accountants, and so on) to the inspection.
• The government must set up a coordination system and a plan for inspections.
• The inspection agency must give the business 3 days notice and clearly indicate the goals and objectives of the inspection.

New Law Simplifies Tax Procedures

On June 5, 2000, the Armenian Parliament adopted a simplified tax law that became effective on July 1, 2000. The law regulates accounting principles of small and medium enterprises and allows private entrepreneurs to use a simplified accounting system on a voluntary basis. The simplified system replaces the value-added tax (VAT) and profit tax for legal entities and the VAT and income tax for private entrepreneurs. Private entrepreneurs or legal entities whose total turnover of goods and services during the previous year does not exceed 30 million Dram, excluding VAT (approximately US $55,000), can apply to use the new system at local branches of the tax inspection office.