Ex-head of Armenian CB considers it possible to reduce income tax rates and increase social budget expenditures by reducing the shadow

ArmInfo. The former head of the Central Bank of Armenia Bagrat Asatryan considers it possible to reduce the rates of income tax by reducing the shadow. "Fighting corruption and transferring to the white field will also increase wages and pensions to citizens without increasing the debt burden on the country," Astaryan said on May 30, responding to a question from ArmInfo.

According to the economist, a society where more than 30% of the population is below the poverty line cannot develop. In this regard, an increase in the expenditure part of the budget for social services is the first priority of the new government.

The expert does not think that the only resource to increase spending on the social sphere is external borrowing, to which the past governments have actively resorted. "Traditionally, the economic authorities have solved internal social problems through external borrowing, but today there are many sources for this, first of all, this is a reduction of shadow and the fight against corruption," he said.

In addition, according to the expert, the new Cabinet should concentrate its attention on increasing the efficiency of budget expenditures. "More funds are being sent from the budget to the coverage of the Armenian capital than to the development of science, and the activities of such a dummy structure as the Public Council are unreasonably funded," he said. By monitoring expenditures, eliminating inexpedient articles, it is possible to increase pensions and wages, Asatryan said.

According to the assessment of various international structures, the shadow economy in Armenia has grown to 35-50% in recent years, and due to the scale of the "shadow", the Armenian budget annually loses about $ 1.5-2 billion annually.

The former Cabinet of Karen Karapetyan in the first decade of April this year. He stated his readiness to reduce income tax rates. Preliminary assessments indicated that it is time to consider the possibility of reducing the tax burden for a more active economic environment. Already in the wake of a nationwide protest, on April 20, former Prime Minister Serzh Sargsyan informed not only about the government's plans to reduce the income tax, but also to raise pensions and a minimum wage.

Meanwhile, pensions and wages in Armenia have not increased since 2015. The issue of reducing the tax burden was acute when the new Tax Code was adopted in 2016, but then under the pressure of the IMF and World Bank the new government of Karapetyan passed through the parliament this document. The political opposition also raised this issue. Thus, the opposition bloc Elk suggested revising the scale of income tax in the Tax Code, supplementing it with one more "intermediate scale" for employees receiving salaries in the range of 150,000-300,000 AMD, fixing a tax of 26%. "The proposed changes will have a negative impact, including on the part of ensuring the profitable part of the state budget," the then Minister of Finance Vardan Aramyan said in February. The minister recalled that within the framework of the Tax Code, from January 1, 2018, workers pay income tax on a new scale that is more favorable to them. Thus, the tax burden for citizens receiving wages less than 279 thousand drams a month, and this is 90% of all wage earners in the country, has decreased. The change proposed by the "Elk" bloc will provide an additional income for 2,000 citizens on average of about 420 drams. Aramyan considered this proposal unreasonable, since it does not provide for mechanisms to compensate for budget losses.