Most of the hidden income comes from small and medium-sized businesses; large businesses generally pay taxes regularly" />

Almost a quarter of Armenian economy remains untaxed

Most of the hidden income comes from small and medium-sized businesses; large businesses generally pay taxes regularly

Armenia, shadow economy

The share of the Armenian economy remaining outside taxation is 22 percent, head of the State Revenue Committee of Armenia David Ananyan said earlier today, noting that businesses engaged in trade most often avoid paying taxes.

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In Armenia, a significant part of the shadow economy consists of small and medium-sized businesses.  Big business after the “velvet revolution” that took place in the spring of 2018 have begun paying taxes more regularly because it is difficult to hide large financial flows.

It is difficult to engage in the withdrawal of money into the shadows at large enterprises and to work that way for years.  If only because our tax department works with such enterprises on a daily basis,” said David Ananyan, head of the State Revenue Committee.

According to him, the biggest contributor to the ‘shadow economy’ is trade, in addition to agriculture. The revenue service is trying to deal with violators by making more rigorous checks.

Expert opinion

The 22 percent announced by the State Revenue Committee is pretty close to reality, economist Hrant Mikayelyan believes.

He conducts his own research on the share of the shadow economy and claims that in August, 24 percent of the Armenian economy was ‘in the shadows.’

The expert agrees that large business generally pays taxes.  This is evidenced by the large number of new, officially registered workers and the amount of taxes paid.

And in the case of small business, according to the economist, it is difficult, and in some cases useless, to fight the shadow economy:

Take, for example, people who rent out apartments.  To date, a tax of 10 percent has been established.  Only one percent of this is recorded. Now we could bring the tax down to two percent for all transactions to be recorded.  Theoretically, we can do this.  However, it will be difficult to ensure that everyone records their transactions, it is simply unprofitable.”

 In an interview with JAMnews, the expert confirmed the statement of the state structure on which areas have more “shadows”:

The ratio of spheres shows that a large share of the shadow is in trade and services. For example, there is not much an issue in the production industry.”

Hrant Mikaelyan also said that before the revolution, the share of the shadow economy reached 26 percent of the total.  And the current figure of 22 percent may actually be reduced to 12 percent.

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