By Shakeh Avoyan
The Armenian government approved on Thursday a package of legislative and administrative measures aimed at significantly increasing the presently modest amount of its tax revenues. The three-year plan of actions envisages the abolition of controversial privileges enjoyed by local and foreign firms, improved tax administration, and a tougher crackdown on widespread tax evasion, a key reason for the uneven distribution of benefits of Armenia’s double-digit economic growth.
The tax revenues, the principal source of government expenditures, have steadily grown over the past decade. But they were still equivalent to 14.6 percent of Armenia’s Gross Domestic Product last year, one of the lowest proportions in the former Soviet Union. The ratio is projected to rise to 15.7 percent this year.
According to Armen Alaverdian, deputy head of the State Tax Service (STS), it will reach 20 percent by 2010 if the government program is successfully implemented. “Curtailing the shadow sector of the economy will be critical for raising the tax/GDP ratio,” he said, referring to one of the main objectives of the plan.
It is not clear if the authorities plans to take drastic measures against the country’s wealthiest government-connected businessmen that are believed to grossly underreport their earnings. Alaverdian indicated only that the STS will continue to publish the lists of the leading corporate taxpayers and hopes that the Armenian media will help it expose glaring differences between the conspicuous wealth of so-called “oligarchs” and modest taxes paid by them.
Speaking at a news conference, Alaverdian said the government will also expand the list of taxable economic activities, scrap profit tax exemptions enjoyed by companies registered abroad, and close other legislative loopholes. In addition, he said, the program envisages a sweeping overhaul of the STS which should improve its performance and raise the professional level of its employees. The government hopes to reduce widespread corruption among tax officials by raising their wages and toughening legal punishment for corrupt practices, he added.
The STS and the Armenian customs collected 90 billion drams ($254 million) in various taxes and other duties during the first quarter of this year, up by 27 percent from the same period in 2006. Proceeds from value-added tax remained the single biggest source of the revenues, accounting for almost half of the total.