“The sad reality in this country is that tax collection, as a share of the total economy in Armenia, is extremely low, even compared to sub-Saharan Africa standards,” Guillermo Tolosa, the IMF’s new resident representative in Yerevan, told a news conference.
“I am sad to report that many of the reforms in tax administration that the IMF has supported and the government has made a great effort in implementing have not resulted in the outcomes that we were expecting in terms of higher tax collection,” he said. “And definitely, some of the reforms that we were expecting from the government have been moving at a slower pace than we were anticipating.”
The Armenian government’s tax revenues have grown steadily and considerably since the late 1990s, but they remain very modest in relative terms. The revenue total was equivalent to almost 16.5 percent of Gross Domestic Product last year. The proportion is one of the lowest in the former Soviet Union, highlighting the scale of tax evasion in Armenia.
The government and Prime Minister Tigran Sarkisian in particular have repeatedly declared improved tax administration a top priority. Sarkisian pledged on Thursday to step up an ongoing government crackdown on tax fraud which he said will primarily target large and lucrative companies. Starting from this year, they will be required to have their financial statements to tax authorities certified by independent auditors.
Tolosa did not assess the wisdom of the measure criticized by some local entrepreneurs. He stressed instead the need for a better performance of Armenia’s State Revenue Committee (SRC), singling out its special unit dealing with large corporate taxpayers. The unit should have a “greater role and participation” in the government drive, the IMF official said.
The SRC collected 80.5 billion drams ($204.3 million) in various taxes and duties in the first two months of this year, up by 19 percent from the same period of 2009. The sharp increase was made possible by renewed economic growth.
The Armenian economy contracted by 14.4 percent in 2009, resulting in an almost 16 percent drop in tax revenues.