By Atom MarkarianThe Armenian government intends to launch a crackdown on the widespread underreporting of workforce and their wages by private employers in the hope of raising its tax revenues, Labor and Social Affairs Minister Aghvan Vartanian said on Monday.
In an interview with RFE/RL, Vartanian estimated that as many as 300,000 workers in the private sector are falsely shown earning up to 20,000 drams ($40) a month, the legal threshold for taxable incomes, in financial reports filed by their employers. That allows the latter to avoid paying payroll and social security taxes.
“I can say for certain that in reality private sector wages are three or four times higher than that sum,” he said. “Even a worker washing dishes in a café doesn’t make less than $150. And yet official papers may show them getting 13,000 or 20,000 drams.”
Vartanian added at least 130,000 other people have jobs but are not officially registered at all.
The average monthly salary in Armenia, calculated on the basis of financial statements filed with tax authorities, currently stands at 42,000 drams ($84). Economists have long pointed out that the real figure is higher due to the hidden employment and wage underreporting.
One of the ways of addressing the problem considered by the government is to set a separate minimum wage for the private sector that would be much higher than the existing benchmark of 13,000 drams a month. However, international labor regulations do not allow the practice.
Vartanian said the government will focus on tightening its oversight and financial inspections of businesses. He said the oversight unit of the State Social Insurance Fund, the government agency in charge of collecting pension taxes, will be turned into a separate and more powerful agency directly subordinated to the Labor Ministry. The planned restructuring could translate into tens of millions of dollars in additional tax revenues that would in turn allow more tangible increases in tiny state pensions, he added.
Their average amount has grown by nearly 40 percent to 8,800 drams ($17.5) over the last two years. The modest pension increases have not been accompanied by a corresponding rise in social security contributions, with the Social Insurance Fund increasingly struggling to pay the pensions on time. Pensioners in some regions of Armenia have still not been paid for September.