Taxes won't help to fill gaps in Armenian budget

Susanna Petrosyan, Yerevan. Exclusively for Vestnik Kavkaza
Taxes won't help to fill gaps in Armenian budget

Despite assurances about economic growth and creation of conditions for fair competition in business, the Armenian government, in fact, has not taken any real steps to remedy a number of negative phenomena, which have existed for many years. The authorities did not conduct any struggle against the monopolistic track of the economy established in the country, supervising monopolies to the detriment of small and medium-sized businesses. It does not conduct any serious struggle against such phenomena devastating for the economy and for the country as a whole as corruption and 'the shadow economy'.

"I'm not aware of any step of the government which would be aimed at the reduction of the shadow economy," the former prime minister, Grant Bagratyan, said.

According to the economist and representative of the board of the opposition party Armenian National Congress, Vahagn Khachatryan, none of the specific questions contributing to the development of the economy, has been resolved in the previous 5-6 post-crisis years, as the ideology 'if you have any problems, you need to take out loans' was being followed: "As a result of these approaches we have such a disappointing situation."

Unresolved problems led to the creation of a serious situation in the issue of tax collection. According to the first Deputy Minister of Finance, Pavel Safaryan, this year's tax revenues will be lower than envisaged by the state budget. According to official figures, the budget provides for the collection of 1 trillion 138 billion AMD of taxes and fees in the current year ($1 = 480 Armenian drams). According to the Ministry of Finance, from January to September 2015 taxes were collected amounting to $1 billion 661 million, while in the same period of last year it was $1 billion 904 million. Thus, the difference is 13%. According to the deputy minister, the decline in tax collection is associated with lower economic growth than the one which was provided by the budget. According to the forecast of the IMF, economic growth in Armenia at the end of this year will be 2.5%, whereas the budget provided for 4.1%. The budget for next year provided to collect much less in taxes than this year - 1 trillion 129 billion drams if the growth will be 2.5%.

Without belittling the importance of the ratio of the level of economic growth to the revenues, we should note that, according to many experts, the most important reason for low levels of tax revenues is maintaining a high level of the 'shadow' economy. According to some experts, today it is not less than 55% of GDP.

Two weeks ago, the Armenian parliament approved the draft amendments to the law on excise taxes in the second reading. In addition to the argument that the new law is aimed at harmonizing Armenian legislation with the laws of the member countries of the Eurasian Economic Union, the government is voicing another argument, that the increase in excise tax rates is aimed at solving the problems of the budget revenues, which were formed due to the low level of tax revenues. The law provides for an increase in excise taxes on cigarettes, alcohol, gasoline and liquefied natural gas.

The authorities argue that there will be no rise in prices and the burden of the new excise rates will be borne by economic entities and not consumers. However, the adoption of the law has angered some opposition politicians, as well as some expert and public circles. Opponents of the new law believe that the increase in excise tax rates will hit the population once again. And while cigarettes and alcohol are not essential goods, but in the case of an increase in excise taxes on gasoline and liquefied petroleum gas, which is being used for the most of Armenian transport, this concern is justified, given such an important fact as the dominance of monopolies in the economy.

"Monopolies stifle the country's economy - gasoline, sugar, grains and medicines. Gasoline prices are falling all over the world, but our prices are rising," the opposition politician Khachatur Kokobelyan said. According to the head of 'Informed and Protected Consumer' NGO, Babken Pipoyan, the new law will cause natural price growth.

Returning to the solutions to budgetary problems by raising excise taxes, we should note that some experts doubt that these taxes will help to somehow fill the gaps in the Armenian budget. It is still not clear how this money will be spent. The authorities have done nothing to eliminate the policy of "kickbacks" and necessary tenders. Opacity of the costs shows that any attempt to fill the budget will be ineffective.  7or.am columnist Koryun Manykyan believes that in these circumstances of expenditure, only the corrupt officials should be happy about additional budget revenues, and the citizens of Armenia will get only the consequences of rising prices.

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