By Emil Danielyan
The Armenian government said on Thursday that it remains on track to meet its increased expenditure targets, having ensured a 30 percent rise in its budgetary revenues during the first five months of this year. A detailed report circulated by the Finance Ministry put their total amount at 134.4 billion drams ($300 million) or almost 40 percent of the governments annual budget target.
Armenia’s state budget for 2005, projected at 394.6 billion drams, calls for an almost 25 percent increase in the still modest public spending. Much of the expected extra money is to be channeled into social security, health care and education.
The Finance Ministry said proceeds from the collection of various taxes and customs duties, which make up the bulk of the budgetary revenues, were 24.2 percent up from the same period last year. It said the increase was the result of continuing economic growth, improved tax and customs administration as well as a crackdown on endemic tax evasion which was announced by the authorities in January.
According to the ministry report, the value-added and excise taxes remain the principal source of the government’s tax revenues, accounting for almost 60 percent of the total from January through May. Their unusually high share is seen by economists as an indication of Armenia’s continuing economic woes and a huge scale of tax evasion.
Nonetheless, the authorities seem to be at last improving the collection of corporate income tax, a key focus of the ongoing crackdown. Their profit tax revenues barely rose in the last few years despite double-digit rates of economic growth. They are now reported to have surged by 72 percent during the first five months of 2005, but sill made up a modest 16.8 percent of the overall tax proceeds.
Armenian companies, including some of the country’s most lucrative businesses, routinely underreport their earnings and their employees’ wages to avoid taxes. The government moved to tackle the widespread practice last year by introducing a 1 percent turnover tax for all businesses that claim to be making losses.
In another measure, they released earlier this year the list of Armenia’s 300 largest corporate taxpayers. Two-thirds of them paid less than $20,000 in profit tax during the first quarter of 2005. That includes some of the country’s fuel importers.
Some companies owned by wealthy government-connected “oligarchs” were not included in the list at all. One such company called Fleetfood enjoys a de facto monopoly on the highly lucrative imports of wheat, sugar, alcohol, and cooking oil to Armenia. It posted zero profits in the first quarter. Fleetfood is owned by Samvel Aleksanian, a parliament deputy with close ties to the ruling regime.
Another “loss-making” tycoon and perhaps the country’s wealthiest man, Gagik Tsarukian, owns over 40 medium-sized and large firms. Only a few them can be found in the taxpayers’ list. One of Armenia’s two main breweries, for example, is owned by Tsarukian and has for years claimed to operate at a loss.
The government has also tried to discourage tax fraud by drafting a bill that would significantly toughen punishment for the practice. But it was forced to withdraw the bill from the National Assembly last March after it met with strong resistance from lawmakers. Many of them are wealthy businessmen.