Speaking in parliament on May 29, Sarkisian said his government will ban “all kinds of inspections in small and medium-sized enterprises” until the end of next year in a further effort to stimulate Armenia’s economy hit hard by the global recession. He said the measure will apply to 22 state bodies empowered to inspect private firms.
However, a corresponding decision made by the government later on May 29 and subsequently posted on its website makes clear that the State Revenue Committee (SRC), which comprises Armenia’s tax and customs services, is not among those bodies. It also specifies that the decision will affect those companies that have an annual turnover of up to 70 million drams ($190,000).
Tax and customs officials have long been the main source of inspection-related complaints from local firms and SMEs in particular. Many of them claim privately that tax inspectors are harassing them to extort bribes and meet their rising revenue targets at any cost.
Tax authorities, for their part, point to the fact that Armenian businesses routinely underreport their revenues. The SRC has toughened its crackdown on tax fraud this year amid a deepening recession that has resulted in a significant fall in government revenues. According to some small business owners, while the frequency of tax inspections has remained the same, SRC officials are now raising larger sums from SMEs which they believe have evaded taxes.
Even so, the government’s tax revenues fell by almost 16 percent to 151 billion drams in the first four months of this year. The shortfall is calling into question the execution of Armenia’s record-high state budget for 2009.
The government still hopes to avoid major spending cuts, having just secured a $500 million anti-crisis loan from Russia. Officials have said some of that money will be used for financing the increased budget deficit. Armenia is also expected to receive a budgetary loan from the World Bank in July.