Improved Tax Collection Eases Armenia’s Budget Deficit

Prime Minister Tigran Sarkisian holds a weekly meeting of his cabinet

YEREVAN (RFE/RL)–The Armenian government’s tax revenues jumped by nearly 20 percent in the first quarter of this year, slashing the state budget deficit to a level equivalent to just over 1 percent of GDP, the Ministry of Finance said on Thursday.

Authorities point to the latest fiscal data is a further sign that Armenia is emerging from its first major economic downturn since the early 1990s. Renewed economic growth in the country accelerated from January through March, resulting in a first-quarter GDP increase of 5.5 percent.

A budget deficit of 6 billion drams ($15.6 million) recorded during this period was well below almost 35 billion drams projected by the government late last year. The figure puts the government on track to meet a full-year deficit target of 193.5 billion drams set in the 2010 state budget.

The government’s budgetary revenues plummeted in 2009 amid a double-digit decline in economic activity resulting from the global economic crisis. The government needed hundreds of millions of dollars in emergency loans from abroad to avoid significant cuts in public spending. The deficit-to-GDP ratio exceeded 5 percent as a result.

Improved tax collection has significantly eased the fiscal imbalance since then. According to the Ministry of Finance, the State Revenue Committee (SRC) collected 127.1 billion drams in various taxes in the first quarter of 2010, up by 19 percent year on year and about 10 billion drams more than was projected.

The figure also slightly exceeds the government’s tax revenue in the first quarter of 2008. The Armenian economy was still expanding at double-digit rates at the time.

Increased proceeds from value-added tax, the largest source of the country’s budgetary revenues, were primarily responsible for the gain. The ministry also reported strong gains in the collection of other key taxes.

The latest tax data comes on the heels of strong criticism of the Armenian tax authority voiced by Prime Minister Tigran Sarkisian. He complained earlier this month that tax evasion among large companies remains widespread and that the SRC has failed to tackle the problem in earnest. He stressed the need for a tougher government crackdown on the practice.

Sarkisian criticized the SRC in even stronger terms on April 15, accusing it of harassing small and medium-sized enterprises (SMEs) and being far more lenient towards larger firms suspected of grossly underreporting their revenues. He was particularly unhappy with a 2009 upsurge in the SRC’s controversial inspections of various businesses.

SRC data shows that the national gas distribution company, ARG, remains Armenia’s number one corporate taxpayer, having paid 5.24 billion drams in various taxes in the first quarter of 2010. ARG is followed by the Aleks-Grig company of government-linked businessman Samvel Aleksanian, which enjoys a de facto monopoly on imports of sugar, flour and other basic foodstuffs.

The country’s leading taxpayers also include fuel-importing, telecommunication and energy firms.


Discussion Policy

Comments are welcomed and encouraged. Though you are fully responsible for the content you post, comments that include profanity, personal attacks or other inappropriate material will not be permitted. Asbarez reserves the right to block users who violate any of our posting standards and policies.