Negative trends in the Armenian economy continue to deepen. According to the latest data of the National Statistical Service (NSS), direct foreign investments more than halved compared to 2014, amounting to 180.5 million dollars. The volumes of transfers also continue to decrease compared to 2014, they decreased by 30% and amounted to 1 billion 216 million dollars. The level of tax collection also decreased. Over the first two months of this year, the State Revenues Committee has collected 3 billion drams ($1 = 475 drams), less taxes than in January-February of last year. To cut a long story short, despite all the assurances of the authorities about economic growth, the official data indicate the completely opposite situation.
But instead of taking effective measures for economic development, including promoting small and medium-sized enterprises (SMEs) and promoting export industries, the country's authorities have decided, as often happens, to go a roundabout way, by developing the new tax code. In April, the Armenian government approved a draft tax code, which was submitted to the National Assembly. Some provisions of the new tax code will be implemented in 2017, and the entire code will be implemented in 2018.
The draft provoked a huge reaction in political and expert circles. Government representatives assured that the document should ensure long economic growth, stability and predictability in the field of entrepreneurship. An important role in this is played by the introduction of a system of liberalization of value added tax (VAT). According to the deputy chairman of the State Revenues Committee, Vakhtang Mirumyan, the new tax code includes deferral of payment of VAT to the customs and tax authorities for 10 and 20 days respectively for several major industries. Exporters will also receive several VAT benefits.
Government representatives also draw attention to the question of ensuring the long-term stabilization of the budget revenues, mostly at the expense of excise taxes. It is proposed to review the excise rates for cigarettes, vodka and some types of fuel, including liquefied gas, in 2017-2021. Economists remind that most types of transport use liquefied gas, and the increase of excise tax for this type of fuel will lead to higher prices for transport.
But this is not the only issue that bothers the opponents of new tax code. According to the chairman of the Association for Cooperation of Small and Medium-sized Enterprises, Akop Avakyan, the new code further strengthens the mechanism of tax control – the tax authorities receive more powerful mechanisms, which are are equivalent to the instruments of the Service of Compulsory Execution of Judicial Acts.
However, last year the government raised the threshold for taxation from 50 million to 120 million drams for SMEs, but this measure is not enough for their development. Economists suggest freeing these enterprises from paying taxes for several years, with the exception of income tax. But this proposal was not reflected in the new tax code.
An important factor, which causes concern among oppositionists and experts, is that the draft tax code envisages the complete inclusion of such spheres as agriculture, education and health in the tax field, which were only partially taxed until now. Perhaps from an economic point of view the provision of equal conditions for all spheres is a normal thing. Increased taxation in the education and health spheres would be logical if there was effective agriculture, which would be less dependent on weather conditions, than the agriculture of Armenia. Another precondition for the use of this mechanism is a solvent population. Unfortunately, Armenia has none of these.
According to the official figures, 30% of the country's population is poor. Low living standards are caused by the dominance of a monopoly structure in the economy, high prices, as well as considerable problems in the sector of small and medium-sized enterprises, the reduction of money transfers from Armenian migrants in Russia and other serious problems. This entire complex of problems leads to the fact that citizens are often unable to resolve issues related to healthcare and education. Meanwhile, the use of the new principle on taxation of these spheres will make health services and access to higher education even more unaffordable for many people.
So instead of carrying out necessary reforms, fighting corruption, favoritism in business and tax evasion, the authorities are trying to create an additional mechanism for tax collection through the new tax code. But tax collection at all costs does not ensure real economic development. An attempt to lay the tax burden on citizens lies in the basis of these actions. But the use of this approach in the conditions of Armenia means further impoverishment of the masses.
