Prime Minister Nikol Pashinyan attended online today’s joint session of National Assembly Standing Committees on the 2019 State Budget Performance Report. Nikol Pashinyan made a speech, in which he stated:
“Honorable National Assembly Speaker,
Deputy Speakers,
Chairman of National Assembly Standing Committee on Fiscal and Budgetary Affairs
Standing Committees Chairmen,
National Assembly Members,
Members of Government,
We are starting a parliamentary debate on the 2019 State Budget Performance Report. I would like to state that 2019 was a historic year for the Republic of Armenia in terms of budget exercise, because the Government of the Republic of Armenia managed to generate extra 104 billion drams in tax revenue than planned. At the same time, 62 billion drams of that amount became state budget revenues, and the debt of value added tax, the debit, which was formed before January 1, 2017, was returned in the amount of about 42 billion drams, and I think this was a historic event.
We know that an unprecedented 7.6% economic growth for at least the past 12 years was stated in 2019. We had a tax-GDP ratio of 22.35 percent, which is 1.6 percentage points higher than the projected 1.4%.
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We are discussing the 2019 budget performance amid the resignation of State Revenue Committee Chairman David Ananyan, and since Mr. Ananyan will leave that position, I would like to take this opportunity to thank him for fruitful work.
I think there will be new changes in the State Revenue Committee and in the system in general in the near future, and we hope that these substantive changes that started as early as during Mr. Ananyan’s tenure will be continued.
Dear colleagues,
I just talked about the historic fiscal year, and as yesterday I was preparing for today’s speech, I noticed that our government was not fortunate enough to have a non-historic year, or rather, that our government has the ability to operate for historic years or to do historic years.
2018 was a historic year with the Velvet Revolution in Armenia, as well as with parliamentary elections unprecedented in the history of Armenia thanks to its level of democracy.
2019 was a historic year in terms of economic activity, the role of the citizen and the individual in the development of the economy. 2020 is at least historic because of the coronavirus epidemic.
It is clear that this year we will have certain economic problems, it is clear that this year we will have problems due to the epidemic, but I would advise you not to rush into research on what will be 2020, because I think that this coronavirus period has just started, we still don’t know how long it will take and the results, even to sum up the losses, are too early.
But I want to go back to the concept we originally adopted in the context of budget exercise that we called “The crisis as an opportunity.” Because I think that these days, a process of in-depth re-evaluation is taking place in the Republic of Armenia, and that this process of in-depth re-evaluation is linked to relations between the state and individuals.
Today we are facing and looking into the relationships between the individual and public order, the relationship between each of us and public order, and, in fact, we are faced up with the question: How do we see our state? Do we perceive our state as formulated in history textbooks as a tool of violence, or do we still perceive our national state, the Republic of Armenia, as an expression of our desire to have a state?
This is a very important and conceptual issue, and I think that as a result of and due to the epidemic we need to rethink the relationship between the state and the individual, because, according to the old perception, laws are written by the authorities to keep us under control: Under the new perception we all need to create laws, rules of coexistence, as an agreement on how we are going to live and interact with each other. And it is clear that when I say that we all create the laws, I mean that we do so through the institutional tools that are formed by the free expression of our will.
The people freely elect a parliament, the parliament makes laws, and the Government applies the laws. And I want to believe that it is now a revolutionary time in Armenia, because during the 2018 Revolution, we re-evaluated and transformed our relationships towards our freedoms and rights.
During the epidemic, we need to reassess our attitude towards discipline and our civic responsibilities, in general. In this regard, the state budget is of particular importance, and the political and civic perception of the state budget is of particular importance.
Today, I do not want to focus too much on the figures and economic indicators we have, because I have had the opportunity to talk about this on several occasions, including my statements made in Parliament, the more so that the government members and the heads of department will present these indicators. I want to talk about the political and civic context of the budget, I want to believe that we had an old perception of the budget and now we have to create a new perception of the budget.
There is an old perception of the budget, which states: “The budget is adopted by the authorities in order to take away part of the money we earn.” The new perception of the budget should be as follows: “The state budget is our common wallet, which we form together to meet our common needs.” And, in my opinion, this formula is just the dividing line which separates the state-wise thinking people from non-State people or which draws the border between those who want to have a State and the ones that do not want to have a state. I am confident that we will opt for the first path, of course.
In this context, I would like to say that while I called historic FY2019 in terms of budget collections, nevertheless, we must admit that we failed to collect all of the potentially available revenue in 2019. According to various assessments, there is a huge underground economy in Armenia, and there are even estimates that the untapped budget potential could be higher – up to 400 billion drams for example. In fact, I think this is where the change in thinking comes in.
Bureaucracy, of course, is very important, discipline is also very important, but I would like to stress our ideology, my personal perception that discipline should not be the result of the use of force and coercion, although it is obvious that in some cases this tool is inevitable, but psychologically and philosophically for the people of the state. Discipline, including budgetary discipline, should reflect the citizen’s will to have a State, because state budget implies security. This is why we are contributing to the treasury so much as to ensure our collective security. It would be illogical if we expected each family to defend a small section of our national border. This is why we make tax payments so that the government could meet our common needs.
At the same time, I would like to stress that this need is common, regardless of social status, party membership, profession, age or state of health. Similarly, if someone wants to move from point A to point B in the Republic of Armenia, conventionally assuming that he or she comes from Svan to Yerevan, it would be illogical for each person moving or each family to build their own path.
First of all, because it is impossible, and second, it would be very ineffective. This is why we are making payments together so that we can build our common path from our common wallet, which is our state budget. This is true for education, the rule of law, etc.
It is very important that the attitude towards the budget and law and order change. I hope that this process began in 2019, although I know that despite the revolution and numerous calls from the government,, tens if not hundreds of thousands of people failed to ask for cash-register receipts, and that is why we have to change our attitude. But I want us to see the budget discussions and parliamentary debates not only from the perspective of revenue /expenditure, but also from a political viewpoint, because for me the budget and the attitude to the budget is the answer to the following question. Do the Armenian people, the citizens of the Republic of Armenia have the will to have a State considering that the budget is the backbone of our statehood? Compliance with fiscal liabilities is the expression of the citizen’s will to have a State.
In this respect, I would like to say that the discussions we had over the past year and a half should lead to a significant change in state officials’ salaries and in the public opinion on this matter. Whereas there is a general agreement that the pyramid of corruption is to be ruled out in Armenia, the citizen of the Republic of Armenia should call for and must be willing to have a state where civil servants receive a high salary because this is also an expression of our will to have a state.
What do we want when we take care of our family needs? Do we want a professional doctor to take care of our problem, or do we want a bad doctor to take care of it? And many times in our homes, I am convinced by my own experience, when there is a problem in our house to solve the smallest household need, and when we hire the cheapest possible labor on the market of work and the worker, on the same renovation needs, after all, for a year. We pay more than if we immediately decide to buy a quality product, quality service and, ultimately, quality control over it.
I would like to stress again that it is very important that this is an expression of the will to have a state, because it contains a message. Let us suppose, for example, that the one billion drams that should be used to fund the salaries of senior state officials and judges cannot bring about major changes in the lives of 3 million citizens of the Republic of Armenia. Instead, it can change a lot if spent on the recruitment of highly professional public servants. This is the logic of our actions, and I would like to repeat that yes, the crisis is an opportunity.
I believe today is the best time for reforms, because we have nothing to lose economically and otherwise. In 2019, we were very careful, we focused on economic growth, activity, income. But now we are in a situation where we have nothing to lose, or rather our present is lost today and we have to think about tomorrow. In this respect, the expression of our desire to have a state should be the attitude towards the reforms that the government is undertaking today. In particular, we are talking about a change in the property tax system, a change in the general income tax, we will talk about a change in cash flow reduction in the near future, because there is a very important philosophical change with respect to property tax.
You know that in the Republic of Armenia there was a rule that property worth less than 3 million drams is not taxed with property tax. We propose to change this system, because we say that the relations between the State and the citizen are very important, the citizens who own goods worth even less than 3 million drams must express their will to have a state.
Let them pay 100 drams a year, and in practice it does not matter much whether people pay 200 or 300 drams a year. The amount of 300 drams they used to save up for 30 years did not change a lot in their lives, but these 300 drams can change a lot in the State’s activities. It changes a lot in terms of people’s willingness to have a state, and now I see the discussions on changes to these tax regimes as a turning point in that regard.
I have repeatedly noticed during cabinet discussions, and now I want to state in public that we thereby are not solving a minor issue of tax revenue: we are solving a problem. Will the Republic of Armenia exist as a sovereign, free and democratic state in the next 20 years? What I said in this connection is not an exaggeration: with the new property tax system, the universal income tax return initiative and a number of other changes, we are not solving a problem of fiscal receipts. We are just addressing a political and philosophical dilemma, namely whether the Republic of Armenia will survive as a state over the next 20 years? Because 300 drams per year that a citizen who owns property worth less than AMD 3 million shall have to pay will enhance Armenia’s security not only physically, but also psychologically in terms of state organization. And I want that segment, that component to be always present in our budget discussions.
In conclusion, I would like to say the following: ladies and gentlemen, thank you for this opportunity, I wish you every success. I wish you effective discussions within the Standing Committees of the National Assembly. Government representatives, including the heads of bodies subordinate to the Prime Minister and the heads individual agencies will answer your questions. Thank you.”
INFORMATION AND PUBLIC RELATIONS DEPARTMENT OF THE OFFICE OF THE PRIME-MINISTER OF THE REPUBLIC OF ARMENIA
