Minister Says Can Meet 2002 Target Without IMF

YEREVAN (RFE/RL)–Minister for State Revenues Yervand Zakharian assured on Monday that Armenia’s tax authorities are able to meet their budgetary target for this year without taking additional measures suggested by the International Monetary Fund.

In accordance with the government’s 2002 budget–the ministry for state revenues and the customs department are to collect 194.4 billion drams ($347 million) in taxes and import duties or 16 percent more than last year. The tax revenues alone are due to surge by nearly one quarter.

In an interview with RFE/RL–Zakharian said the record-high target is "difficult but possible" to meet after recent changes in over a dozen Armenian laws regulating taxation.

The IMF–however–believes that the authorities are unlikely to improve tax collection unless they take additional fiscal measures. These include levying value-added tax on all imported goods at the point of their entry into Armenia and reducing the number of such commodities exempt from VAT.

Zakharian cast doubt on the wisdom of those measures–arguing that most basic goods are already being taxed at the Armenian border. He said: "My opinion may be subjective but it is backed by economic analyses. I don’t think that taxing all imports at the border is a good idea."

But he made it clear that the government is ready to show flexibility at the upcoming talks with a visiting mission from the IMF. The Fund is blocking release of additional World Bank and IMF loans until Yerevan takes the suggested steps. It points to the government’s failure to implement the 2001 budget in full.

The shortfall in planned revenues equaled $9.5 million last year–according to official figures. Zakharian said it largely resulted from the difficult financial situation in the loss-making energy sector. He said his agency plans to ensure fiscal gains mainly by cracking down on the huge informal sector of the economy.

"The shadow economy is quite big," the minister admitted. "The estimates that it is equal to 40 to 50 percent of our GDP somewhat correspond to reality."

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