How to increase Yerevan’s budget by 725 million
In one of the previous releases of our newspaper we have adverted to the fact that Yerevan’s budget is small, the means are limited and therefore it’s impossible to expect serious projects from city authorities.
The annual budget of Yerevan is approximately 63 billion AMD (160 million USD) and we occupy the last places with the budget per one resident among the other cities of the world. We have also written that the opportunities of increasing the revenues are quite limited because of the tax administration of Armenia functions in a way that the incomes go the country’s main budget instead of the city budget. Nonetheless, there are still some imperceptible opportunities which can increase the treasury of the city. One of those can be conditionally called “tax for tourists.” Its essence is the following. The tourist who would settle in Armenia’s hotels and hostels would pay 5-10% of the room price as a city tax, which would go to the city budget.
Let’s mention that this is not a new original solution. Many of the European cities have long ago been applying this model (Rome, Florence, Barcelona, etc.). As reported by the Associated Press, the city authorities of Berlin have also decided to apply a 5% tax for tourists, which will be paid immediately during the hotel check-in. In Russia this tax has also been applied during 1991-2004.
Then they stopped applying this model. However, in some districts of Russia (Saint Petersburg or other cities of Stavropol region) they wish to apply this mechanism again. In 2011 this idea was approved by the then-president Dmitry Medvedev, but this mechanism has not been applied yet. What will the benefits of Yerevan if this tax form is applied? It is difficult to conduct concrete calculations but we can have an approximate picture with no major issues. According to the national statistics, during the previous year Armenia hosted 843,330 tourists, which grew by 11,3% compared to the current year.
The recently conducted research shows that only 10% of tourists choose to stay in hotels. However, there are more concrete data that pertain to Yerevan and the people who stay in hotels. Thus, according to the data of the National Statistics Service in 2011 the hotels of Armenia have rented out 556,900 bedrooms, 340,500 out of which were in Yerevan. This figure is unknown for 2012. If we rely on the growth of the total number of tourists then we may assume that last year Yerevan’s hotels and hostels sold 380,000 bedrooms.
In Yerevan the average price of a single room in a hotel is 38,000 AMD. Let’s mention that this figure was taken from the sources of Booking.com. It turns out that Yerevan’s hotels and hostels are annually receiving 14,5 billion AMD. 5% of that amount is 725 million AMD. The internal competition of the hotels will not be violated because this tax will be applied for all hotels.
And its impact on the inflow of tourists is also minor. For someone who plans to visit Armenia won’t be considered too much if he gets to pay $105 instead of $100. And this money can be spent purposefully. It could be spent to properly represent Yerevan to the world.
Ultimately, in the 2013 budget of Yerevan, the PR and its branding are considered a serious target. As a comparison, let us mention that the 2013 budget of Yerevan anticipates only 396,7 million AMD for the cultural sector (libraries, museums, culture homes, monuments, etc.).
And with additional 725 million many new things can be done. The tourists should be attracted by the culture. It means that the right use of the tax levied from tourists if used consciously can develop tourism and cause more serious results. Of course, the above-mentioned will not be solving the global issues of the city but this is a step that can be taken regardless of which political party will win the municipal race.
By Babken Tunyan
