TIGRAN SARGSIAN: BY TAX COLLECTION LEVEL ARMENIA IS IN ONE OF LAST PLACES AMONG TRANSITIONAL ECONOMIES

Noyan Tapan
Nov 01 2006

YEREVAN, NOVEMBER 1, NOYAN TAPAN. Depsite the high growth rate of
its economy, Armenia is in one of the last places among transitional
economes by its t axes/GDP ratio. Chairman of the Central Bank of
Armenia (CBA) Tigran Sargsian said this during the 2007 draft state
budget’s discussion in the RA National Assembly standing committees
on November 1. According to him, in 2007 the government plans to
increase the tax collection to 15.6% of GDP, which is by 1.1% more
than in 2006. Taking into account that a 0.4% annual growth in the
ratio of taxes/GDP has been programmed in recent years, a 1.1% growth
planned for 2007, according to the CBA Chairman, creates serious
problems for the government. He said that in order to achieve this
index, the government will submit to the NA a legislative package,
whose purpose is to reduce considerably the share of shadow economy
and improve tax administration. Particularly, the package includes
measures aimed at reducing the dollarization and the amount of cash
in circulation. Some laws proposing new instruments to fight against
the shadow economy and improve the competition atmosphere will also
be submitted to the parliament. T. Sargsian said that the government
had considered it expedient to plan an inflation of 5% plus-minus
1.5% for 2006. An inflation of 4% plus-minus 1.5% is programmed
for 2007, while in 2008, it will return to 3%. In his words, the
cause of more than 3% inflation is the increase in the prices of
some goods, particularly fuel and bread products, on international
market in 2006. The CBA Chairman noted that the settlement rate of 1
US dollar of 357 drams in next year’s state budget has no relation to
calculations of the market exchange rate. "This is not the exchange
rate that is formed in the market, but the one allowing to express
the budget’s foreign currency revenues and expenditures in drams,"
he explained. He attached importance to this idea in terms of not
sending wrong signals to the public and economic entities. He added
that the government has calculated this index based on the programmed
financial flows and the macroeconomic indices.