The Armenian government has narrowly failed to meet its key budgetary target for the first half of this year despite ensuring a more than 4 percent rise in tax revenue.
Under the 2014 state budget drawn up by former Prime Minister Tigran Sarkisian’s cabinet, the government’s total revenue is due to rise by around 10 percent to 1.13 trillion drams ($2.75 billion). The budget calls for a corresponding surge in expenditure needed for financing, among other things, salary increases for public sector employees. It also commits the government to keeping the public deficit at below 3 percent of GDP.
According to the Armenian Finance Ministry, first-half state revenue amounted to 532.6 billion drams ($1.3 billion), up by 5.4 percent year on year but 2.3 percent less than was projected by the government. Taxes and duties accounted for almost 94 percent of that figure, rising by only 4.2 percent in January-June.
Deputy Finance Minister Armen Alaverdian admitted on Friday that the full execution of the 2014 is now at risk. “Of course there are risks,” he told RFE/RL’s Armenian service (Azatutyun.am).
Alaverdian said the first-half shortfall is primarily attributable to tax authorities’ failure to collect 21.4 billion drams in planned extra taxes from large companies. He said that it in return results from recently enacted changes in an Armenian law on corporate profit tax and a sizable drop in international prices of copper, a key Armenian export item.
“We intend to raise larger sums for the state budget at the expense the shadow sector in the second half of the year,” added the official who has long held senior positions at the State Revenue Committee, Armenia’s tax collection agency recently merged with the Finance Ministry.
Prime Minister Hovik Abrahamian moved to address the shortfall shortly after he was named to head the government in April. Abrahamian met with more than 100 wealthy entrepreneurs on May 14, telling them to warn stop evading taxes or face a tougher crackdown by tax authorities.
According to Alaverdian, the government is now preparing tax evasion proceedings against some of the companies owned by those tycoons and looking into the veracity of earnings posted by others, notably the Alex-Grig firm belonging to Samvel Aleksanian, one of Armenia’s richest men close to the government.
Alex-Grig has long controlled lucrative imports of wheat, sugar and other basic foodstuffs. It is already one of the country’s leading corporate taxpayers.