By Armen Zakarian
The Armenian government has agreed to take additional administrative measures to improve tax collection suggested by the International Monetary as a condition for the release of more loans, Minister for State Revenues Yervand Zakharian said on Saturday.
Zakharian told RFE/RL that the government has accepted the IMF demand to start levying value-added tax on most imported goods at the point of their entry into Armenia despite having serious misgivings about the effectiveness of the measure. He said the Armenian business community also has serious objections.
“Nevertheless, the matter has already been discussed by the government and received a positive solution,” Zakharian said, adding that ministers will “very soon” ask the parliament to make corresponding changes in Armenia’s tax legislation.
VAT taxation at the border, which the IMF believes will reduce tax evasion, is the main condition for the disbursement of two delayed IMF loans worth approximately $26 million. They are part of the $87 million Poverty Reduction and Growth Facility (PRGF) approved by the fund last May.
Officials from the Armenian finance ministry and a visiting IMF mission discussed the issue during two-week negotiations in Yerevan in February. But no agreement has been announced as yet. Finance and Economy Minister Vartan Khachatrian said on February 28 that shortly after the talks the IMF unexpectedly set additional conditions for unblocking the release of the two PRGF tranches.
The IMF credit is designed to shore up hard currency reserves of the Armenian Central Bank and thereby contribute to continued macroeconomic stability in the country.
Zakharian also said that his agency, which is responsible for tax collection, has met its revenue target for the first quarter of this year which was set at 21.5 billion drams ($37.7 million) or 10 percent higher than in 2001. He acknowledged that the tax collection proceeded with serious difficulties and that he has sacked three senior tax officials for poor performance.
No figures were immediately available from the government’s customs department, which also provides a substantial share of government revenues.
The two agencies are supposed to collect 194.4 billion drams in taxes and import duties in 2002 or 16 percent more than last year. The tax revenues alone are due to jump by nearly one quarter. Zakharian said it is “very difficult but possible” to ensure the increase. He reiterated that the tax authorities will tap the huge shadow sector of the Armenian economy to raise additional budgetary funds.