Finance Ministry's Clarification on the Publication 'Where is the Budget's 900 Million Dollars?'

The article published by '168 Hours' newspaper titled 'Where is the Budget's 900 Million Dollars? Is This the Result of Nikol Pashinyan's Fight Against the Shadow Economy?' has incorrectly represented the thoughts expressed by the Minister of Finance Atom Janjughazyan during the Armenian government session on April 18, 2018, regarding the terms 'tax expenditures' and 'tax potential' and their corresponding indicators.

In particular, the article presents non-existent data and figures claimed to be the calculations of the Ministry of Finance. 'According to the calculations of the Ministry of Finance, last year the state budget did not receive more than 900 million dollars in the form of taxes. Where is that money?' the newspaper states, while no such calculation, official document, or statement exists. As a source for this figure, the author of the article references Minister Atom Janjughazyan's statement during the government session that the calculated tax potential for 2018 was approximately 438 billion drams more than the total collected taxes.

In another part of his speech, Minister Atom Janjughazyan stated: '...the relatively light tax regime has been assessed at approximately 442 billion drams for the year 2019 as tax expenditures due to the regulation of benefits, not only in agriculture but in general. This amount reflects the benefits provided by existing regulations that the state budget would not receive under equal conditions.' Essentially, Janjughazyan was discussing two different indicators and citing two different figures. From these two indicators, the author concludes and claims that the state budget of Armenia loses 880 billion drams annually, or 70 percent of the budget's tax revenues. However, Minister Janjughazyan repeatedly emphasizes in his remarks that more than half of that amount pertains to tax benefits granted by the government, and the other half still requires methodological clarifications to determine which part is subject to taxation. This article has caused confusion in the media landscape, resulting in journalists skewing quotes from Minister Atom Janjughazyan's statements while questioning the head of the State Revenue Committee, Davit Ananyan, on April 30, 2019, claiming that the state budget of Armenia was under-fulfilled by 438 billion drams for 2018. Based on these distorted quotes, Ananyan suggested that perhaps Atom Janjughazyan had mixed up the terms. However, during the government session, the Minister was discussing two different terms: 'tax potential' and 'tax expenditures.'

Clarification:

- Tax potential is the monetary expression of the total sum of taxes that can be collected across the entire real economy (collected taxes + tax expenditures + tax shadow).

- Tax expenditures are the total sum of taxes that are not collected due to benefits provided by legislation.

Ministry of Finance of the Republic of Armenia