The National Assembly approved on Thursday Armenia’s state budget for next year that calls for a sizable increase in tax revenues questioned by the Armenian government’s tax collection agency.
The budget drafted by Prime Minister Tigran Sarkisian’s cabinet was backed by 66 parliament deputies and rejected by two others.
Most of the deputies representing the opposition Dashnaktsutyun and Zharangutyun parties boycotted the vote. Both parties have criticized the government for what they see as a very modest rise in social spending planned in 2012.
The budget commits the government to spending 1.04 trillion drams ($2.74 billion), up by about 5 percent from this year’s level. Its budgetary revenues are projected to reach 911.6 billion drams.
The resulting budget deficit is to be equivalent to 3.1 percent of Gross Domestic Product, down from about 4 percent forecast for 2011. To that end, the State Revenue Committee (SRC) will have to collect 101 billion drams in additional taxes, duties and social security payments in 2012.
The head of the SRC, Gagik Khachatrian, has repeatedly described this tax target as unrealistic. Sarkisian and Finance Minster Vache Gabrielian have dismissed Khachatrian’s objections. They say the SRC will be able to collect the extra revenues as a result of continued economic growth, improved tax administration and fresh amendments to Armenian tax legislation that were also passed by the parliament on Thursday.
The amendments are supposed to mainly target wealthy Armenians. In particular, they raised from 20 to 25 percent the rate of personal income tax for people earning 2 million drams ($5,260) or more a month. The government bill will also lead to sharp rises in taxes levied from expensive cars and alcoholic beverages and casinos.
The government based its budgetary targets on the assumption that the Armenian economy will grow by 4.2 percent in 2012. Gabrielian admitted last month that renewed recession in Europe could slow that growth and thus complicate the planned increase in tax receipts.
Sarkisian likewise warned of a fallout from Europe’s sovereign debt crisis when he addressed the parliament on Tuesday. “We are obliged to monitor global processes and take preemptive measures to minimize their impact [on Armenia,]” the prime minister said.
Social security, education and healthcare will absorb nearly half of the projected government expenditures. The government is to spend roughly 200 billion drams on defense, security and law-enforcement and around 47 billion drams on debt servicing.