By Atom Markarian
The Armenian government's budgetary expenditures will grow further in the next few years but they will still make up a small share of the country’s Gross Domestic Product, officials said on Wednesday.A three-year program approved by ministers calls for a major increase in tax revenues which should allow the government to boost its modest public spending. Under that plan made public by Deputy Finance Minister Pavel Safarian, the tax revenues will equal 15.9 percent of the GDP in 2008, up from 15.1 percent projected for this year.
The proportion is very low even by ex-Soviet standards and is the most vivid indicator of the scale of tax evasion in Armenia. The authorities announced a major crackdown on the endemic practice last year, with President Robert Kocharian personally warning the country’s leading businessmen that they should stop grossly underreporting their earnings.
The crackdown is aimed at ensuring a 25 percent rise in the proceeds from the collection of taxes and import duties. They are projected to total 307 billion drams ($690 million) in 2005. They government now appears on track to meet that target.
Safarian told reporters that the tax revenues are projected to grow by another 53 billion drams next year. He said at least half of the extra money will be used for raising public sector wages and social security benefits. Similar hikes are envisaged for 2007 and 2008, he added.
Safarian also said the program’s successful implementation is based on expectations of annual economic growth of 6 percent. According to official figures, the growth rate has averaged 11 percent in the last four years and slowed to 7.8 percent during the first quarter of 2005.