By Atom Markarian
The Armenian government approved on Thursday plans to make its tax inspectorate responsible for the collection of workers’ mandatory social security contributions, saying that the measure is needed to ensure promised increases in pensions.
The government will send to parliament a package of draft amendments to over a dozen laws that formalize the transfer of that authority for the State Social Insurance Fund to the State Taxation Service. Officials said they hope the changes will be passed by the National Assembly and will take effect on January 1.
“As a more specialized body in terms of money collection, the tax inspectorate has a bigger arsenal and functions which the pension fund does not have,” the deputy head of the Taxation Service, told reporters, pointing to its sweeping investigative powers. He said fund employees responsible for social tax collection would be automatically transferred under his agency’s jurisdiction.
Alaverdian added that the changes would allow to boost the Pension Fund’s revenues by between 15 and 20 percent next year. The fund has failed to ensure such increases and is now struggling to pay the modest retirement benefits on time. Their average amount has grown by nearly 40 percent to 8,800 drams ($17.5) over the last two years. The government plans to further raise the pensions in 2005.
The proposed change is part of a crackdown on widespread underreporting of workforce and their wages which was announced Labor and Social Affairs Minister Aghvan Vartanian on October 25. He estimated that as many as 300,000 private sector workers are falsely shown earning up to 20,000 drams ($40) a month, the legal threshold for taxable income, so that their employers can evade taxes. He said at least 130,000 other Armenians have jobs but are not officially registered with the tax authorities.