ArmInfo. The universal income declaration system will be launched in Armenia from 2023. The initiative will be implemented in three stages and by 2025 it will become mandatory for all citizens who are residents of the Republic of Armenia. " Once again, we first adopt an incomplete law, and then look at what will come of it," Soghomon Mirzoyan, President of Association of Financiers of Armenia, said in an interview with an ArmInfo correspondent, talking about the risks and timeliness of the government's initiative.
Any initiative of this scale requires clearly defined goals as well as measurable indicators of expected results. However, the project of the normative act submitted to the public does not reveal the stated goals and objectives of the initiative. <Today, we can only judge the alleged desire of the government to bring the income of the population to the legal floor. The desire is positive, but we have yet to weigh certain risks along the way against possible benefits>, the expert notes.
Meanwhile, the author of the bill, the Miniser of Finance, states that the legislative initiative pursues a number of goals. First of all, this is due to the introduction of a personalized system for recording the income of individuals so that the state can get to know its citizens better, identify socially vulnerable groups of the population for their more targeted support. "The authorities of Armenia already today have enough resources to achieve this goal," Mirzoyan said. "The government is unlikely to achieve wider access to information about citizens' incomes within the framework of this initiative", he notes.
The lack of measurable performance indicators will also make it impossible to assess the possible volume of income "out of the shadows" and, in general, the degree of effectiveness of the initiative. <The universal declaration of income should have been accompanied by an in-depth analysis of what it would give the state and society. Today, I do not find effective indicators for the future in the project. So, we do not know how much the introduction of the system will cost the state treasury and the same taxpayer. Has a SWOT analysis been carried out that will make visible to us the strengths and weaknesses of the project, its opportunities and threats? Without a deep professional analysis at its core, the project becomes vulnerable>, Mirzoyan believes.
Whose income can be announced not in a whisper, but publicly? Soghomon Mirzoyan is convinced that income declaration as such is a very good idea, and in some cases, it should be mandatory. In particular, it is in the interests of the state and society to declare the income of certain categories of citizens. However, it is one thing to require the disclosure of the income of a certain group of citizens, and quite another to switch to a universal declaration of income. "It is still too early for Armenia to introduce the Universal Declaration of Income system," the financier believes. And this is due, first of all, to the low level of financial literacy and awareness of the population, even if, according to the idea of the Ministry of Finance, the declaration should first be filled in automatically by the tax authority based on the information at its disposal, and the declarant will only need to make in the document of amendments and additions. <Imagine a pensioner or an ordinary peasant who keeps track of his own income and expenses. It is unlikely that the tax office has information about all the income and expenses of the villagers. And also imagine that he will have to do this without the right to make a mistake, since the authors of the bill threaten to apply sanctions against those who incorrectly or did not fill out the declaration on time. And, even if we assume that the introduction of the system does not imply an increase in the tax burden on citizens, the initiative promises additional costs to those citizens who may not be able to make the declaration themselves, and it can be said for sure that there will be many such cases>, Mirzoyan emphasizes.
Do vague motivational mechanisms motivate successful implementation of the system?
According to the Ministry of Finance, the initiative contains a very important motivational component in the form of the introduction of a system of social spending, widely used in world practice. In particular, persons submitting declarations will be able to reduce tax liabilities in the amount of spending on health care, education and housing made by them or some members of their families during the tax year, confirming them with settlement documents.
Despite the fact that the reform is perhaps one of the most ambitious and concerns the entire population of the country, even a few days before its launch, the financial authorities are not ready to specify what the motivational toolkit will be - the project proposes a solution of not so secondary important issues, such as clarification of the directions of social spending, the number and range of family members the expenses of which will be taken into account during the tax deduction, to be left to the future or rather, at the discretion of the government.
<Will the motivational mechanisms in the form of introducing a system of social spending work? We don't know. Again, the project is incomplete due to the lack of figures, expert analysis, which will allow us to conclude whether the possible benefit for the state will prevail over those costs, investments that the treasury of the republic, that is, the taxpayer himself, will have to fork out under the promised system motivations. And in the absence of such measurable indicators, all this is like a system of good wishes>, the financier insists. But we will not do it immediately, but in stages:
In fact, such risks could have been avoided, or at least minimized, if the authorities had not rushed to introduce the system - immediately and for everyone. According to him, a real step-by-step approach could be expressed in the fact that the financial authorities of the country would first determine the risk groups and start with those whose non-declaration of income is fraught with certain, predictable risks for the state, the expert notes. And to oblige an ordinary pensioner, a villager to submit an income declaration, will become an additional administrative burden and expense for the state and the citizen, rather than a possible benefit for the parties, Mirzoyan believes.
<Of course, it was necessary to develop an algorithm of actions, a strict sequence of steps that could negate many potential risks. Meanwhile, we once again adopt a law, and then we wait to see what will come out of it. A vivid example is the law "On Mandatory Funded Pension", and, unfortunately, we have plenty of such examples - a law is being adopted and in the process we are trying to adapt the public to it. And what if unexpected, more serious risks arise in the process of its implementation? Each law, first of all, should be based on calculations and justifications. This project is deprived of these components, which is very dangerous and fraught with consequences>, the President of Association of Financiers of Armenia concluded.