ANCA and U.S. Ambassador exchange views on bilateral economic relations

In an example of the State Department’s expanding digital diplomacy and diasporan engagement, U.S. Ambassador to Armenia Richard Mills took part in an online Facebook exchange last week with the Armenian National Committee of America regarding the growth of the U.S.-Armenia economic partnership, a shared priority for both the Department of State and Americans of Armenian heritage.

“We welcome this transparent exchange of views with our diplomatic corps on pressing bilateral economic priorities, and look forward to similarly open, honest discussions about U.S. policy on Artsakh, the Armenian Genocide, and other issues as well,” said ANCA Communications Director Elizabeth Chouldjian. “We commend Ambassador Mills and our mission in Yerevan for leaning forward on social media, constructively using Facebook, Twitter, and other platforms to engage Americans in the vital work of U.S. diplomacy.”

ANCA National Board member Aida Dimejian recently highlighted the importance of a Double Tax Treaty in a video message, noting that it would “reinforce the friendship of the American and Armenian peoples, anchoring Armenia to the West and providing Yerevan with greater strategic options and independence in dealing with regional powers.”

The Facebook exchange, echoed on Twitter, stemmed from an ANCA comment on an Embassy post about the Ambassador’s recent speech at the American Chamber of Commerce on U.S.-Armenia relations. In this comment, Executive Director Aram Hamparian had asked for updates regarding three ANCA priorities: An MCC STEM education grant for Armenia, a Double Tax Treaty, and direct U.S. to Armenia flights.

Below is the Facebook exchange between Mills and Hamparian:

Ambassador Mills to ANCA:
Aram and our friends at ANCA:
– First step to a MCC for Armenia is to meet‎ the MCC criteria – why we are focused on fighting corruption and building rule of law so Armenia might again qualify; big test is how free and fair April elections are conducted. Even if these steps don’t lead to a new MCC, Armenia will be far better for it. Welcome ANCA’s engagement on these issues.

— ‎Without a welcoming business environment in Armenia a double tax treaty is for now an unnecessary diversion – why Embassy focuses on issues like rule of law, customs reforms, and ensuring an equal playing field for foreign investors. So far, little evidence the lack of a new tax treaty has kept out U.S. investment. If such cases exist, we’d like to hear them.

— The U.S. Embassy and Gov’t of Armenia jointly achieved the open skies reforms that now allow Western air carriers to consider the Armenian market. Thanks to this, passenger traffic at Zvartnots is up by 12% and ticket prices are lower across the board. Now up to Armenian Gov’t to make the business case for scheduling air services to Armenia. Embassy is supporting with a new focus on tourism projects that build economic justification, but private U.S. firms make their own business decisions.

ANCA’S Response To Ambassador Mills
Dear Ambassador Mills,
Thank you for your thoughtful responses, and – more broadly – for all you and our team at U.S. Embassy Yerevan and USAID Armenia are doing to grow the American Armenian relationship, including through increased bilateral trade and investment. You may have seen our post yesterday on this point.

We welcome – in the very best of our American democratic tradition – an ongoing, open and transparent discourse on these issues of shared concern.

On your first and third points, dealing with MCC and direct U.S.-Armenia flights, you point to external dependencies: In the case of MCC, ratings by outside organizations regarding Armenia’s progress; on direct flights, the commercial interest of airlines. The actions taken by these other stakeholders, however, should not prevent any of us from voicing support for initiatives we consider worthwhile. For our part, we will continue to work for progress on both of these initiatives. We invite you to publicly express our government’s general support for both a potential new MCC grant and the launch of direct U.S. to Armenia flights.

Your second point, regarding a Tax Treaty, deserves a more detailed response.

Here is what you wrote: “‎Without a welcoming business environment in Armenia a double tax treaty is for now an unnecessary diversion – why Embassy focuses on issues like rule of law, customs reforms, and ensuring an equal playing field for foreign investors. So far, little evidence the lack of a new tax treaty has kept out U.S. investment. If such cases exist, we’d like to hear them.”

As you know, a double tax treaty is not a special privilege extended by one party or the other, but rather a baseline bilateral accord, a basic amenity of global commerce and a hallmark of good, transparent government.

Due to the absence of such a treaty between the U.S. and Armenia, there is today no clear legal framework for investors and individuals that have business activities in both jurisdictions. This creates legal uncertainty that deters potential U.S. investors, diverts investment flows, and disadvantages American businesses.

Think of it this way: A shop owner with an outdated storefront proclaims that no one has ever complained to him/her about his/her business’s appearance. The reason, of course, is that potential customers who consider his/her place unattractive just walk past the shop. In much the same way, the absence of a working tax treaty – a key element of the storefront appeal of U.S.-Armenia commercial partnerships – deters potential investors from ever seriously considering Armenia. A new treaty would eliminate this artificial and unnecessary barrier, allowing Armenia to compete for investment on its own merits.

The “chicken and egg” aspect of this matter has been explored by Congressman Brad Sherman, during Congressional hearings.

In Armenia, as in much of the developing world, businesses typically do not complain to foreign governments about their tax problems. The absence of reporting is not the same as an absence of problems. One could not, for example, credibly argue that the lack of criminal complaints about domestic violence is evidence of the absence of such crimes. Under-reporting needs to be taken into account in any serious analysis.

Consider also:

— Our government has Double Tax Treaties with many countries, including smaller ones, such as Estonia, Jamaica, Lativa, Lithuania, Malta, and Slovenia.

— Our government has Double Tax Treaties with many countries rated by Transparency International in the bottom half of its Corruption Perceptions Index, including Pakistan, Bangladesh, Egypt, Sri Lanka, Thailand, and Indonesia,

— Armenia has Double Tax Treaties with many advanced countries, including Austria, Belgium, Canada, China, France, Italy, the Netherlands, Poland, Russia, and the United Kingdom. (As you know, Armenia does not recognize the legal applicability of the 1973 U.S.-U.S.S.R. Tax Treaty.)

— U.S. firms have gone on record to our U.S. government regarding a Tax Treaty, among them Microsoft, FedEx, NASDAQ, Marriott, Grant Thornton. More recently Triada Studio and other IT firms operating in both Armenia and the U.S. have also publicly called for such an accord.

Please know how much we value the service of U.S. diplomats and all those working in our missions abroad.

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