Where is the $900 million of the budget?

“168 Jam” newspaper writes: According to the calculations of the Ministry of Finance, last year the state budget did not receive more than $900 million in taxes. Where is that money?

It is reminded that before coming to power, Nikol Pashinyan promised to increase budget revenues by at least 30 percent by overcoming the shadow economy. This is equivalent to an annual additional roughly $800 million, which is a significant amount for the state budget of Armenia.

Nikol Pashinyan has been Prime Minister for a year. How successful he has been in increasing budget revenues is another question. Let’s just note that last year the government could not even fully implement the adjusted tax revenue plan. And this is despite the fact that after the change of power, a war was declared on the shadow economy and irresponsible taxpayers.

It turns out that the war has not yielded serious results. Despite Nikol Pashinyan’s promises, the huge shadow funds continue to circulate in Armenia that bypass the state budget.

According to Atom Janjughazyan, their estimates indicate that in 2018, 438 billion drams less tax was collected in Armenia than should have been. This refers to taxes generated in the shadow that the state budget did not receive.

And this is said by the Minister of Finance of the government that has declared an irreconcilable fight against the shadow economy. The amount that the Minister of Finance mentions is equivalent to almost 35 percent of the state budget's tax revenue. This is essentially an assessment of the shadow in Armenia's economy.

Now let’s see how successful the new authorities have been in reducing the shadow economy. For this purpose, it is necessary to clarify the share of taxes in the gross domestic product.

According to last year's results, the tax-to-GDP ratio in Armenia was 21 percent. Compared to 2017, it has improved by 0.2 percent.

This is the result of the government that has waged a merciless fight against the shadow economy and the Prime Minister who promised a 30 percent increase in budget revenues.

In many countries similar to ours, the share of taxes in GDP reaches even up to 26-27 percent, or even higher. In contrast, in Armenia, the tax indicators have been fluctuating between barely 20-22 percent for a long time.

Due to the shadow economy alone, the state budget loses more than $900 million annually. An equal amount is not received by the budget in the form of exemptions.

The total amount corresponds to 880 billion drams, which is equivalent to 70 percent of the budget's tax revenue.

For more details, see this issue of the newspaper.