Improved tax collection translated into a sharp fall in the state budget deficit that had skyrocketed during last year’s economic recession. The first-half deficit reported by the ministry stood at 16.9 billion drams ($46 million), equivalent to 1.3 percent of Gross Domestic Product and well below the government’s full-year target.
The official figures show the State Revenue Committee (SRC) collecting 286.2 billion drams in various taxes and duties, or 11.7 percent more than was projected by the government for the six-month period. That mainly resulted from a 36 percent surge in proceeds from value-added tax (VAT), the largest source of Armenian tax revenues.
As always, roughly two-thirds of them came from imported goods and commodities taxed at the border. Even so, the Finance Ministry said domestic commerce generated most of the VAT gain. This contrasted with official statistics showing virtually zero growth in first-half retail trade.
Significantly, revenues from corporate profit tax shrunk by more than 3 percent to 43.5 billion drams. The drop suggests that the government has yet to make good on its pledges to make large companies underreporting their earnings “the number one target” of its crackdown on tax fraud. Profit tax continues to make up a small share of their contributions to the state budget.
The Armenian authorities hope to address the problem by, among other things, deploying soon permanent SRC “representatives” at some large enterprises suspected of tax fraud. A list of 24 such entities was approved by Prime Minister Tigran Sarkisian’s cabinet in late June. It mostly comprises Armenia’s leading importers of foodstuffs, alcohol, cigarettes and drugs.
In a related measure, the government has also obligated some 285 companies with an annual revenue of over 1 billion drams to have their financial reports filed with the SRC certified by independent auditors starting from this year.