Tax administration in Armenia has improved considerably in recent years even if there is still “serious work” that remains to be done by tax authorities, President Serzh Sarkisian said on Tuesday.
Sarkisian argued that the State Revenue Committee (SRC) has doubled the Armenian government’s budgetary revenues over the past few years while simplifying taxation procedures for local firms.
“People can see just how little time they now spend drawing up their financial reports and, in general, dealing with tax bodies,” he said at a meeting with the SRC leadership. “This is a fact. Naturally, we must continue this trend. I would like to see similar progress in the work of customs bodies.”
Sarkisian added that his government remains committed to completing “large-scale reforms” of tax administration.
The Armenian Ministry of Finance reported a more than 20 percent surge in tax revenue in the first five months of this year. Increased proceeds from value-added tax, mostly levied from imported goods, and customs duties accounted for much of this gain. Armenia’s net imports rose at a much lower rate in this period.
Tax collection in Armenia has long been arbitrary and at the same time insufficient as evidenced by a low ratio of tax revenues to Gross Domestic Product. Local entrepreneurs still accuse the SRC of harassing them to meet its budgetary targets at any cost.
Corruption among tax and customs officials is also a serious problem. Many of them are wealthy individuals with extensive business interests.
Western lending institutions have been pressing Yerevan to improve tax administration and the overall business environment, saying that is vital for Armenia’s sustainable economic development. In an article published in May, two senior officials from the International Monetary Fund urged the Sarkisian administration to speed up its tax reforms.
“It is still common for well-connected parties to have privileged market position, or for profits to be wrongfully lost,” they wrote. “Until a more decisive approach and proper incentives for risk-taking are well established, there will not be enough investment, jobs, or hope in Armenia’s future.”
Sarkisian admitted on Tuesday privileged treatment enjoyed by some Armenian businesspeople. Most of them have strong government connections.
The president stressed that the SRC must create a level playing field for all corporate taxpayers. “If one of them works in the shadow sector while another in the legal taxation field, then these two economic entities will certainly not have equal opportunities for development,” he said.
Armenia ranked 108th in terms of the quality of tax administration in the World Bank’s most recent Doing Business survey of 184 economies. The survey released last October admitted progress in the Armenian government’s reform efforts. In particular, it said the authorities have slashed by more than half, to 13, the number of annual payments for corporate income, property, and land taxes as well as social security contributions. Local businesses typically had to make 50 such payments in 2010.