During the discussion of the 2021 budget execution report, Prime Minister Nikol Pashinyan emphasized, “We had an unprecedented historical index in terms of tax collection and taxes-GDP when we recorded 22.7% of the gross domestic product in the form of tax revenues.” The guest of Aravot’s program “Areresum (Confrontation)”, senior vice-president of the Valex Group group of companies and international consultant of public financial management Vardan Aramyan (Minister of Finance from 2016-2018) said in this regard, “As the country develops, the indicators will always be historically unprecedented. For example, in 2006 the taxes were historically unprecedented compared to previous years.”
Vardan Aramyan, emphasizing that there are positive phenomena in terms of tax collection, nevertheless, added, “The sensible doctrine of public administration requires that you try to get rid of popular things in terms of giving signals to society. Maybe for the part of society that does not interpret those numbers very well․․․ but the ones who create an economy are the ones who are quite literate. Such signals are not really perceived positively․ After all, business people see very well how economic indicators are developing.”
In particular, the Prime Minister described the income tax indicators as “one of our strongest and most effective reforms.” He recalled that in 2018, we had a three-tier income tax due to the amount of salaries. However, the government decided to impose a flat income tax. “And then they criticized us, saying, ‘Are you reducing the state budget revenues, state money, etc.’ Now I want to talk about indicators and results. In 2017, 343 billion, 683 million AMD of income tax was collected in Armenia, when all tax rates were incomparably high, up to 10% less than the highest threshold. We have collected income tax of 459 billion AMD, that is, 116 billion AMD or 33% more. This is a very interesting effect that we, by reducing the tax rate, have collected more taxes.”
The other guest of the program, Vache Gabrielyan, Dean of the Simon Manukyan College of Business and Economics, American University of Armenia (2008-2010, Deputy Chairman of the Central Bank, 2010-2013, Minister of Finance, 2014-2018, Minister of International Economic Integration, Deputy Prime Minister), was one of the regular critics. “And if we look at whom the tax was reduced, from whom the tax was collected, the picture is different. They have reduced the tax of more than 2 million recipients. And they mainly collected taxes from previously unannounced jobs, which came out of the shadows. And they were the ones who received much lower.”
Read also
Vache Gabrielyan stated that taxes have really increased. “But from whom they reduced the tax rate, they did not increase it.” Nikol Pashinyan stated that it is possible to understand the reason why we did not have an economic collapse despite certain military-political, geopolitical, and internal political issues. “We are a government that, in fact, does not extort money from the economy, but, on the contrary, returns as much money as possible. I want to emphasize the reduction of the shadow economy in terms of our certain economic resilience, which in turn is a result of overcoming systemic corruption.”
Vache Gabrielyan agreed that there is a reduction of the shadow economy (by the way, he also explained in detail how it turned out that in April 2022, compared to December, we have 5,265 more jobs). “And I can not make any judgments about systemic corruption because neither before nor now there is no research or examination on systemic corruption. According to the World Bank, even the so-called ‘systemic corruption’ is not defined and I do not know how it is measured.”
Reference was also made to the registered inflation. The chairman of the Central Bank, Martin Galstyan, noted that inflation brings with it additional tax revenues. In response to the question of whether the government is taking the necessary steps in this regard, Vardan Aramyan, agreeing with the statement of the CB chairman, said that in order to redistribute, they need to change budget programs, decisions underlying the 2022 budget, which has not been done yet. “I do not see significant, targeted assistance to specially targeted vulnerable groups.”
According to him, “in such a period of shocks, the economy should be supported. And in that part, budget expenditures must be reviewed.” By the way, Vardan Aramyan also mentioned, “There is another danger. If we try to reduce inflation much at any cost, it can be dangerous for the economy.”
Anna ISRAELYAN
