By Albert Khachatryan

 

The Armenian Statistical Service reports that Armenia’s net tax revenues exceeded 378bn AMD this January-August – a 21.4% increase as compared with the corresponding period last year.

During the review period, tax revenues constituted 75.1% of the total budget revenues – hardly any change as compared with the corresponding period last year (75%). However, the tax revenue structure has undergone changes which indicates certain tendencies in commercial activities.

Specifically, due to higher rates of increase during the period under review, the share of the value-added tax (VAT) revenues in the total tax revenues showed a 4.6% increase – 48.2% up to 52.8%. On the other hand, the VAT revenue share showed a 4.1% decrease – 18.2% down to 14.1%.

These structural changes can be considered negative: consumers formally pay the VAT, while companies pay profit taxes. That is, it is ordinary consumers, not businessmen that mainly have to bear the tax burden.

The aggravating factor is that the net profit taxes paid to Armenia’s state budget this January-August have shown an increase of as much as 5.9% as compared with last January-August. This fact can also be viewed in the following aspect: other things being equal, the cost of goods and services has considerably increased, which caused a reduction in profits.

An appreciable increase in foreign trade turnover (25.3%) this January-August certainly contributed to the changes in the budget tax revenues – a considerable share of VAT taxes is deliberately withheld at the customs border. The RA State Revenue Committee reports that the taxes withheld at the customs constituted 48.3% of all the taxes paid by the thousand largest Armenian taxpayers in the first half of 2010.

It should be noted that Armenia’s imports exceed exports several times, which suggests that it is mostly importers that pay the VAT at the customs border. So they – as well as exporters – lose working capital necessary for business operations. It is noteworthy that part of the VAT amount withheld by the customs is reimbursed to companies after recalculations – and after a time gap.

Guillermo Tolosa, IMF Resident Representative in Armenia, recently pointed out a disproportionate share of the VAT paid at the customs, particularly the share forming the government debt to taxpayers. According to the RA State Revenue Committee, VAT overpayments had totaled as much as 52.3bn AMD by this July!