Prime Minister Tigran Sarkisian unveiled his government’s plans to raise income tax for wealthy Armenians and impose higher duties on expensive cars and alcohol as he presented the draft state budget for next year to parliament on Tuesday.
Armenia’s top tax official, meanwhile, continued to openly challenge a sizable increase in budgetary revenues projected by the bill. Gagik Khachatrian, head of the State Revenue Committee (SRC), insisted that a package of amendments to tax legislation drafted by Sarkisian’s cabinet is not enough to meet the target.
The government and the Ministry of Finance in particular say that the proposed changes, coupled with improved tax administration and continued economic growth, can translate into 101 billion drams ($268 million) in extra tax revenues in 2012.
Sarkisian revealed details of the tax package as he addressed standing committees of the Armenian parliament dealing with budgetary affairs.
In particular, it emerged that the government wants to raise from 20 to 25 percent the rate of personal income tax for people earning 2 million drams ($5,300) or more a month. The income tax rate is currently set at 20 percent for all categories of Armenia’s population.
Another draft amendment calls for a 50 percent surge in excise duties levied from expensive alcoholic beverages. Sarkisian did not specify those drinks, saying only that they account for 15 percent of alcohol sales in the country.
The prime minister also called for the introduction of a “luxury tax” on cars worth at least $90,000. This alone would bring 1 billion drams to the state budget in 2012, he said, adding that the government is also considering raising taxes for casinos.
In Sarkisian’s words, the other major changes sought by the government would simplify taxation procedures for small and medium-sized enterprises. “At the heart of the 2012 budget is the idea that we must spend as much as we collect,” he said.
Khachatrian again called this declared objective into question, however, saying that the SRC would seriously struggle to raise tax revenues by 13 percent. “Our concerns remain. We see risks and are working on those risks,” he told journalists after attending the first budget discussions in the National Assembly.
According to Khachatrian, in order to meet the higher revenue target the SRC would have to increase proceeds from taxes paid by Armenia’s 440 largest companies by as much as 30 percent. “It is very difficult to speak of that 30 percent, we would not have such a possibility,” he said. “We need to find other sources.”
“We are now working with all ministries … For some reason, there is an impression here that tax collection is only the SRC’s job. It’s also the government’s job. We are now working together. Time will tell whether or not we will succeed,” added the controversial SRC chief.
Finance Minister Vache Gabrielian dismissed his concerns. “I think that our projections are realistic and I think that there are resources to get [companies] out of the shadow sector and collect additional revenues,” Gabrielian told RFE/RL’s Armenian service (Azatutyun.am).
Large and lucrative companies have long been regarded as a key source of tax evasion in the country. Sarkisian has repeatedly described them as the main target of his government’s crackdown on tax fraud.