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  • More VAT, less profit taxes in Armenia

    news.am, Armenia
    Oct 2 2010


    More VAT, less profit taxes in Armenia

    October 02, 2010 | 10:32

    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!




    From: A. Papazian
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