Armenia reaps first rewards in fight against shadow economy

Tax revenue in Armenia increased by 57 billion drams ($117 million) in the first three months of 2019 in comparison to the previous year.

This figure is four per cent higher than originally predicted.

• Armenian government commission to assess extent of country’s shadow economy

• Almost a third of Armenia’s residents live in poverty, authorities believe no action required

What caused the increase in tax revenue?

The revenue service collected 296 billion drams ($610 million) in the first three months of 2019 – 11.4 billion (almost $24 million) more than the government budget forecast.

The revenue service forecasts it will collect 1.4 trillion drams (more than $2 billion) in taxes for the whole of 2019.

David Ananyan, the head of the State Revenue Committee, says that this is not due to economic growth, but due to the government’s efforts to combat the country’s shadow economy:

“The plan for this year as a whole will be fulfilled and even over-fulfilled due to the fight against the shadow economy. If economic growth helps [with increased state income], we will be very happy. In subsequent years, we hope that economic growth will be the main factor [for increased income].”

The government is aware that the current success does not mean that the fight against the shadow economy is over.

The State Revenue Committee is still assessing the size of the economy that has not been reigned in and subjected to taxation. To this end, the government has ordered a study to be conducted with the aid of foreign expertise.

Preliminary estimates say the share of the shadow economy in Armenia is approximately 30 per cent. In developing countries, the figure is within 20 per cent, while in developed countries it reaches only 5-15 per cent.

More receipts, more money in the treasury

The State Revenue Committee is calling on citizens of the country to demand cash receipts when purchasing goods.

The government informed citizens that this will allow the state to take business out of the shadows and replenish the treasury.

Prime Minister Nikol Pashinyan has also called on Armenia’s citizens to demand receipts for transactions. At the end of March, he acknowledged the results. In the first three months of 2019, 20 million more receipts were issued than during the same period of last year. In March alone the number of receipts issued increased by 34 per cent.

Pashinyan recently came forward to announce where this unanticipated revenue will be allocated:

“I want to emphasize that this is an unprecedented phenomenon in the last nine years. From 1 July 2019, we intend to increase the salary of servicemen of the Armed Forces of the Republic of Armenia by 10%, and from 1 September 2019, to increase the salary of teachers working in secondary schools of Armenia by the same amount. We are talking about 38,000 teachers. In addition, this year we plan to repair approximately 303 kilometres of roads, which is also an unprecedented figure compared to the past nine years.”