The government has completely failed to meet its objectives
During the war, Nikol Pashinyan hastily declared that taxpayer behavior has essentially changed and that, in spite of the difficult economic situation, taxpayers have become more duteous.
Was this another manipulative trick, or were there real grounds for this? It is needless to say since the indicators speak for themselves.
The fact remains that budgetary tax revenues have not only decreased after the Prime Minister’s statement, but also continue to decrease.
The State Revenue Committee has published the indicators for the month of November, and these indicators attest to the fact that, compared with the same month in 2019, budgetary tax revenues have dropped. Last year, the government collected AMD 117 billion, but this year it collected AMD 109 billion. Basically, the government collected AMD 8 billion or 6.8% less.
This was bound to happen. Tax collection is linked to economic development. When the economy is in decline, taxes are also reduced. If the economic situation is bad, this has a negative impact on the state budget. Taxes aren’t generated with desires. There has to be an economy in order for taxes to be generated.
However, Armenia’s economy is currently in an extremely difficult situation, and this means that taxes can’t be increased just like that, if, of course, the government doesn’t turn on the ‘tax clamp’ and punish businesses for no reason.
Such tendencies are already noticeable, and it doesn’t matter whether they are politically motivated or not.
The government has especially cracked down on businesses that have shown some kind of civic behavior during the processes that have been recently taking place in Armenia, have joined the demand for the Prime Minister’s resignation or have participated in protests. Tax authorities have started inspecting some of those businesses, and they are inspecting them blatantly. The inspections began right after those businesses expressed their concerns about the future of the country.
Such behavior of state bodies won’t lead to any positive outcome. On the contrary, it will create much more serious problems, including problems with respect to the ensuring of tax revenues, as well as economic development in general.
To increase tax revenues, first, it is necessary to think about improving the situation of the economy. Currently, the Armenian economy is regressing, and this isn’t contributing to the increase of taxes.
Last year, the authorities were euphoric when taxes were increasing, but they forgot that this wasn’t their talent — the massive import of cars led to the increase of tax revenues, and this served as a good opportunity for the authorities to ascribe the success to them. This year, this is no longer a factor. As for the economy, it is ‘knocked down’. As a result, the authorities are facing rather serious problems with the ensuring of budgetary revenues.
Based on the statistics of the past eleven months, Armenia has collected fewer taxes and duties than last year.
Last year, Armenia collected AMD 1 trillion 314 billion, but this year the country collected AMD 1 trillion 244 billion. This means that Armenia has collected 70 billion less in taxes starting from last year.
This is the indicator of the past 11 months. The difference by year will be greater.
In December 2019, budgetary revenues surpassed AMD 150 billion. This year, it will be impossible to ensure an indicator that is not only similar to AMD 150 billion, but also close to that figure, if, of course, the government doesn’t try to apply its well-known methods of starting inspections, drawing up acts and ensuring formal budgetary tax revenues in one day.
Budgetary tax revenues have been dropping since April of this year. However, there are more risks now in the post-war period due to the government’s inaction, problems posing a threat to the country’s national security and economic challenges.
There is a decline with regard to the majority of types of taxes, even though there was a time when there were different expectations (the government had set major objectives, but it has completely failed to meet them).
Budgetary revenues have dropped with regard to value added tax, profit tax, turnover tax and customs duties.
There are also fewer revenues from environmental tax and payments for nature use, compared with last year. Until recently, it was the opposite (there was growth). After November, there hasn’t been growth.
The reason for this is probably the termination of operation of the Sotk gold mine, which hasn’t been operating since September 27th (the day Azerbaijan launched its military aggression). The Ararat Gold Extraction Plant isn’t operating as well. The related work with the mine has also been stopped.
This has had its direct impact on not only the environmental tax and payments for nature use, but also budgetary revenues in general. It will have an impact not only today, but also in the future. The operation of the Sotk gold mine and related companies is in jeopardy under the embarrassing document that has been signed.
Judging from the profit tax revenues, one can understand the situation of the Armenian economy. Instead of going up, the profit tax has dropped, and by more than 16% at that. The reduction of VAT revenues is also directly linked to the socio-economic situation. The fall in demand has led to the reduction of imports and internal turnovers.
There has been much greater decline in customs duties (there have been 29% fewer budgetary revenues compared with the previous year). The turnover tax has dropped by more than 9%.
Compared with the previous year, there have been 5.3% fewer budgetary tax revenues in the past 11 months. However, it was envisaged that there had to be more budgetary tax revenues, at least 10% more.
There won’t be hundreds of billions of revenues in Armenian Drams this year. Instead, the government will increase the country’s debt, which is now close to $9 billion. While people were expecting debt reduction, the debt grew by almost $2 billion in two and a half years, and it will continue to grow.
HAKOB KOCHARYAN
