By Emil Danielyan
The Armenian government’s revenues from tax collection remain modest in both absolute and relative terms despite having increased considerably in recent years. According to official statistics made public on Wednesday, the government collected over 304 billion drams ($680 million) in various taxes and import duties last year, or 21.6 percent more than in 2004. In an annual budgetary report to parliament, the Ministry of Finance and Economy attributed the rise to double-digit economic growth and improved tax administration.
The sum is worth only 14.4 percent of Armenia’s 2005 Gross Domestic Product. The proportion is very low even by ex-Soviet standards and highlights the continuing large scale of tax evasion in the country.
The government plans a further increase in its tax revenues this year, a necessary condition for implementing its record-high 2006 budget which is projected to pass the $1 billion mark for the first time since Armenia’s independence. But its proportion to GDP will still be low. Some independent analysts believe that the modest public spending could have been much higher if the authorities had taken more radical measures against government corruption and tax avoidance.
Interestingly, the official figures show government proceeds from the collection of excises duties on sales of tobacco, alcohol and fuel falling by 5 percent to 38.6 billion drams. The Finance Ministry report said the decrease primarily resulted from an unspecified fall in the volume of gasoline imported to Armenia in 2005. But it did not explain why the number of cars in Yerevan and other parts of the country has visibly continued to increase over the past year.
Analysts have long questioned the credibility of official figures on fuel imports, a highly lucrative form of business that has been effectively monopolized by a small group of government-connected businessmen.
The Finance Ministry also reported a 45 percent surge in the amount of corporate income tax collected by the State Taxation Service. But that still made up a modest 15.3 percent of the overall tax revenues, with value-added tax remaining their number one source. VAT collection totaled 146.8 billion drams last year, according to the ministry.