FIRST BUDGET OF THE SECOND PHASE OF ECONOMIC REFORMS
Harutyun Gevorgyan

Hayots Ashkharh Daily, Armenia
Oct 5 2007

Interview with Head of the Committee on Financial-Credit and Budgetary
Affairs Gagik Minasyan

" For a long period of time our economy has been recoding an
unprecedented growth, due to which we provide a dynamically developed
state budget. We have recorded an unprecedented high rate also due
to tax-GDP ratio. And I must mention that during the coming years
this growth will not only be continuous but also rapid.

All this is the verification of the fact that our economy and business
atmosphere is improving. In the sum of taxes, the sector of direct
taxes grows more swiftly than the general volume of the tax income. The
tempo of tax income growth exceeds the tempo of GDP growth. During
the coming years we are going to face two principal challenges.

Firstly we must reduce the volumes of shadow economy. We have always
struggled against shadow, but we intend to progress in our achievements
in this sphere.

The next not less important issue is to create equal competitive
conditions. Thus we will get rid of oligarchy, which will promote
the development of economy and will shift market relations to a new
qualitative plane.

The draft budget of the coming year has recorded certain mechanisms
and formulae for the settlement of these problems. It particularly
envisages bringing tax-GDP ratio to 16,2%, which is an unprecedented
index for Armenia. It is impossible to achieve such results without
a principled, serious, and effective struggle against shadow.

"Do you think the reproach of the opposition activists saying that
you could have started this struggle against shadow and corruption
long ago, is justified?"

" If we evaluate our opportunities from the height of our economic,
legislative, social and cultural achievements, with a retrospective
glance, it seems that we could have started to struggle against all
the defective phenomena earlier and more effectively. But those who
observe the issue from that point of view they forget that, years
ago we lacked this civil society, legislative field, this knowledge
and opportunities and why not this Mass Media level."

"Recently Prime Minister Serge Sargsyan announced that the punitive
measures for economic violations and abuses would be criminal and
maximum strict. Does this suggest beneficial preconditions for the
entrepreneurs to come out of the shadow?"

"The reforms of the second generation are the pre-conditions that
are in the stage of implementation. Legislative activity, in this
respect, is of great importance. The thing is there are loopholes
in the law as well. And many dishonest entrepreneurs and officials
make use of these loopholes. I don’t think any entrepreneur can work
in shadow without cooperation with a state official. In this respect
the struggle against shadow and corruption must be multi-plan.

Law is one of them and we have already made certain amendments and
supplementations that demolish the opportunities of similar criminal
cooperation. Particularly the law on "Simplified Tax" was aimed
at the development of small and medium enterprises. But after some
period of time negative aspects of this law were also manifested and
those working by this law managed to evade taxes more easily. Thus
the framework of the "Simplified Tax" was limited."

" Mr. Minasyan, can the weighty surplus of budget lead to undesirable
social consequences?"

"The expenditure of 2008 state budget will make up 820 billion 800
million drams. For a comparison I must underscore that the budget of
the current year makes up 583 billion 700 drams. It is a consequence
of shadow reduction and increase of tax debit. Thus we will mainly
solve social problems.

Hence we can state that the surplus of the budget will definitely
have consequences but they will be desirable and positive. It is
a false statement to say that after shifting to the taxation field
the entrepreneurs will increase the prices. Competition is one of
the positive manifestations of market economy, which lacks negative
consequences. The opposite statement is only a political speculation
and is very far from the logic of economy.

During the previous years the social allowances, pension and salary
have increased, which will continue during the coming years and with
high paces and effectiveness. In parallel with the reduction of shadow,
market economy will have new qualitative manifestations.

And I would like our society to call the budget of the coming year
"The First Budget of the Second Phase of Economic Reforms."