By Atom Markarian
Widespread tax evasion and corruption mean that mainly wealthy Armenians enjoy the fruits of robust economic growth, President Robert Kocharian’s chief economic adviser admitted on Friday.
Vahram Nercissiantz, a US citizen of Armenian descent who headed the World Bank office in Yerevan in the 1990s, argued that the rise in overall living standards is seriously hampered by poor tax collection and the resulting lack of public spending. He said the authorities should ensure a “more just” distribution of incomes among all segments of the population.
“It is obvious that people benefiting from the economic growth are dodging their state responsibilities by evading taxes,” Nercissiantz told RFE/RL in an interview. He added that poor management of public utilities and corruption in the entire public sector are a huge burden on the impoverished country.
“These are that three main financial haemorrhages that impede the entry of sufficient resource into the [state] budget and prevent a just distribution of incomes generated by economic growth,” he said.
Nercissiantz’s assessment of the economic situation in Armenia is largely in line the conclusions drawn by the World Bank, the nation’s main creditor. The bank’s vice-president, Johannes Linn, has termed an “economic paradox” the lack of a significant rise in living standards after seven years of GDP growth that has averaged 5.5 percent. Official figures show that the growth rate has hit almost ten percent in the first ten months of this year.
But as the World Bank concluded in a report last May, “the country has not benefited from commensurate job creation or poverty reduction.” The report pointed to the “narrow base” of Armenian growth and its “limited impact on job generation and, hence, on poverty.”
Nercissiantz warned that the Armenian government risks dampening long-term prospects for growth if it keep up the current extremely low volume of government expenditures on education and health care. “We are still consuming the social infrastructure and human capital inherited from the Communist era, and are not investing enough resources to ensure future economic growth,” he explained.
Nercissiantz said one of the ways of boosting budget revenues is to drastically raise the tax on real estate owned by the rich. He said he has already submitted appropriate policy recommendations to Kocharian.
Tax revenues make up approximately 14 percent of Armenia’s GDP. Their share is twice higher in the developed economies of the world.