How far will SRC go?

Vardan Harutyunyan, State Revenue Committee (SRC) Chairman, during the May 11 press conference concluded results of work implemented in tax and customs field upon Government short-term programme.

Of course, in assessment of SRC work the most important index is collection of taxes. Vardan Harutyunyan started from it by introducing taxes collected in the period of October 2016 to April 2017, i.e. the period of his officiating.

To have a clear view, comparison with previous equivalent 7 months was introduced as well (from October 2015 to April 2015).

SRC in the period of October 2016 to April 2017 provided tax income comprising AMD 653.8 billion. Compared with the same period of the previous year growth of state budget incomes comprised AMD 46.1 billion or 7.6 percent. AMD 500.3 billion was provided by tax bodies, and AMD 153.5 billion—by customs bodies. Growth regarding taxes comprised AMD 43.1 billion or 4.9%, and regarding customs—AMD 3 billion or 1.9%.

Moreover, comparison was provided between the first quarter of this and previous years. Thus, if in the first quarter 2016 SRC has collected taxes amounting AMD 230.7 billion, then this year that index is AMD 255 billion. Collection of taxes has grown by AMD 24.3 billion or 10.5%. It’s noteworthy that program assignments of 2017 comprised AMD 242.4 billion, i.e. SRC has over-fulfilled tax collection by AMD 12.6 billion or 5.2%. Vardan Harutyunyan particularly stressed that tax growth isn’t conditioned by overpayments, in parallel with tax entries, just the contrary overpayments have decreased. In short, after Government change and that of SRC Chairman, tax entries recorded growth. What is this growth conditioned by?

SRC conditions this by reduction of shadow. Based on Committee assessments by late December 2016 shadow was assessed 48.8% among large taxpayers, and in March it reduced to 33.2%. And monthly average shadow of taxpayers assessed as risky decreased by 32%.

By the way, touching upon tax indices, SRC particularly attached attention to April and stated that in April 2017 tax entries were high, more than AMD 107 billion. By interesting coincidence a year ago president of the Republic was touching upon the unprecedented index last April. During the meeting with members of Public Council Serzh Sargsyan stated that in April unprecedented—AMD 100 billion taxes have been collected. Prior to that structural changes have been implemented, SRC was separated from the Ministry of Finance and Hovhannes Hovsepyan was appointed as the Chairman. That time it was also introduced as a result of fight against shadow and corruption.

Then that number was clarified and it became clear that it was not 100 but 97 billion. It wasn’t unprecedented either, however, it’s important that 2-3 months later tax entries again recoded decline. Stagnation of fight against shadow and corruption was recorded.

Is it possible that SRC slowed down its temps this time? Naturally, SRC Chairman assures—no, they’re going to be persistent and launch the second stage of reforms, which will give its results. However, there is another crucial point here: by over-fulfillment of tax entries SRC caused troubles for itself. Observing that actually it’s possible to collect more, than initially planned, the Government has raised the benchmark and will demand more from SRC.

At the April 6 Cabinet session Finance Minister Vardan Aramyan stated that as a result of over-fulfillment of tax entries anticipated tax entries may be increased by AMD 50 billion, at the same time, that much implement capital expenditures. According to him increase of taxes will allow to target high economy growth index in 2017.

For the time being taking over-fulfillment of tax entries as a ground by AMD 11.5 billion, Aramyan said, “If we succeed to keep that behavior, and we consider, our SRC colleagues are rather aggressive, that reforms were implemented in the tax and customs administration, higher index will be available.” The Government has gone to the step of raising budgetary entries and expenditures by AMD 50 billion.

This means the more collected AMD 12.6 billion and anticipated extra tax entries anticipated for the future aren’t over-fulfillment for SRC, but obligation. SRC is obliged to collect by 50 billion more this year.

To the question of “168 Hours” whether they’ll succeed to provide extra 50 billion entries, he replied: we may say we have already provided. This means level of shadow of large taxpayers should decrease from 33.2% (based on SRC assessments) by the end of the year. To our question what level of shadow is anticipated, i.e. how far is SRC going to proceed, the Committee Chairman didn’t give exact number, however, he assured that reduction of shadow will mandatorily be recorded. Of course, it won’t reach zero, and will hardly drop by 15-16 percentage points, as in the first quarter, however, they’ll strive to the maximum.

Although, on the other hand, SRC activeness contains risk for itself as well. If in the second quarter tax entries are over-fulfilled not by 12 billion, but e.g. 20 or 25, the Government may change its mind and raise the benchmark, demanding e.g. 80-100 billion extra taxes.

Another potential threat for economy is that collecting a few dozens of billions more from the business may prevent economic growth.

By Babken Tunyan