Suren Parsyan: The government easily acts against its own interests

ArmInfo. In 2021, the Armenian government intends to attract loans in the amount of about $ 700 million, however, a decrease in the level of collection of state  revenues this year may negatively affect the promises of  international financial institutions to provide these resources.

The government is seriously frightened by such prospects and easily acts  against its own interests, in fact, curtailing all the most important  programs for the liberalization of the social sector and restraining  the development of small and medium-sized businesses. Over and over  again, international donors to Armenia, with the tacit consent of a  weak and frightened government, sacrifice the prospects for economic  growth and the opportunities for improving the well-being of the  country's citizens to a tight fiscal policy. And what were the  promises:  I n the state budget of the country in 2021, which has  already entered into force, the volume of tax collections will be 9%  less than in the past year. Even with a projected 3.2% GDP growth in  Armenia, the government's fiscal and investment policies are likely  to fail as negative expectations are high in both the private and  public sectors. And the authorities are trying to increase the  revenues of the state budget, again at the expense of society, mainly  at the expense of the middle class and low-income citizens, by  presenting a program of measures to reduce tax gaps.

In a conversation with ArmInfo's correspondent well-known Armenian  economist Suren Parsyan noted that in the conditions of decreasing  tax collection volumes, neither the International Monetary Fund, nor  the World Bank, nor the European Bank for Reconstruction and  Development will risk financing the problematic Armenia. In other  words, as the economist pointed out, they will not lend to a person  whose income is falling. "Now Armenia's incomes are falling, and  these financial institutions, of course, will demand from Armenia to  increase tax revenues. If you take a loan (the government plans to  take loans worth about $ 700 million during 2021), you should  increase your income, to ensure the return of financial resources,  "Suren Parsyan said.

The government considers the introduction of VAT on healthcare and  education services as one of the directions of replenishing the state  treasury with additional revenues, thereby making these services less  accessible to a significant segment of consumers. According to Suren  Parsyan, these areas have been exempted from VAT for many years, as  they were considered priority for the state. The economist noted  that, for example, most of the cost of education falls on wages.   "That is, for example, 80-90% of the university's budget falls on  salaries. Now the tuition fee is on average 600 thousand drams, after  the application of VAT it will exceed 700 thousand drams a year. The  university itself will receive its 600 thousand drams, and the rest  amount will be transferred to the state budget. Thus, in the end,  students and their parents will suffer, and ultimately the society  itself, the very idea of strengthening the educational potential of  the country, "the economist stressed, adding that a similar situation  will be in the healthcare sector.

According to him, medical services amount to about 500 billion drams  a year, and if they are levied with VAT, then an additional  conditional 80-100 billion drams may appear in the state budget.   "They will try to collect these revenues in order to increase the  creditworthiness of Armenia, otherwise they will not be given loans.   This is the only goal of such changes," the economist added.

Another way to increase the level of collection of state revenues is  to lower the turnover tax threshold. "At the moment, enterprises with  a turnover of up to 115 million drams can operate in the turnover tax  regime.  Now the government wants to lower this threshold again. Let  me remind you that the threshold was raised and lowered several  times, but as a result of these experiments, it amounted to an  optimal 115 million drams, with the goal of developing small and  medium-sized businesses, conducting active economic activity. But now  the government, in fact, is again trying to tighten tax policy,  especially in relation to small and medium-sized businesses. This tax  policy will deal more than a serious blow to this area of business,  said the economist.  

The third option is the possibility of offsetting value added tax on  agricultural products. "This is based on serving the interests of  supermarkets. When supermarkets, for example, buy 1 kg of potatoes  from villagers for 200 AMD, then, taking into account the VAT  increase by 20%, this amount increases to 240 AMD.  Meanwhile, the  yard shop, which operates in the field of turnover tax will increase  the cost of the same product by only AMD 20 - up to AMD 220.  Supermarket owners understand that prices for their vegetables and  fruits are uncompetitive compared to stores in the`` around the  corner '' format, demanding from the government privileges to  maintain their prices at lower level - AMD 210-220. As a result of  this policy, small shops, yard shops that sell vegetables and fruits,  the prices of which are relatively lower than in supermarkets, will  be severely affected. These large supermarkets want to expand their  sales market, also at the expense of small shops, "Suren Parsyan  emphasized.

According to the economist, the government's policy is, in fact, an  extremely liberal model, and the Cabinet of Ministers has already  demonstrated that it cannot implement it. "For example, from January  1, 2020, a policy of a flat (flat scale) income tax was introduced,  as a result of which people with high wages pay the same income tax -  23% as people with low wages. In addition, the monopolist oligarchs  who paid 20% of income tax, now pay 18%. As a result of these tax  benefits, the state budget did not receive 30-40 billion drams, and  the burden of replenishing this money fell on society. Excise taxes  on alcohol and tobacco have increased. Now, in 2021, excise taxes on  alcohol, cigarettes, gasoline and diesel will rise again.  In fact,  the tax burden that was previously imposed on the rich and very rich  is now being transferred to the whole society, "Suren Parsyan said,  adding that as a result of this fiscal model, society will become  poorer.

"The best argument in favor of this is the official statistics. In  2019, the number of poor in the country increased by about 3%  compared to the previous year. And I assure you that in 2021, as a  result of this policy, the number of poor will increase again, and  the uneven distribution of income will increase. . In other words,  the polarization between rich and poor in our country will increase,  "the economist stated.