168: Another failure. How much money has the budget lost because of this?

These days, the performance of the last year’s state budget is being discussed in the committees of the National Assembly. Discussions started immediately after the parliamentary elections. And although the budget performance debates have lost their political significance after the elections, they still show how the ruling political force has broken many of its previous promises, including those related to the budget.

They will talk for days about the tax revenues circulating in the shadows, about bringing the previous looting to the budget, they managed to improve the level of tax collection by only 1.1 percentage points.

“We were able to in 2021 in comparison, to have an improvement in the tax-GDP ratio by 1.1 percentage points, of which we recorded 0.6 percentage points in 2025,” says the Minister of Finance.

This is the indicator that characterizes the fight against the shadow. It is about bringing money circulating in the shadows to the budget and preventing looting. But, as you can see, the index has not changed significantly. When the economy grows and the government is unable to collect adequate taxes from that growth, it means that part of the growth remains in the shadows, tax administration is incomplete, and the burden of the state budget falls on the shoulders of people and businesses that are already working in the legal field.

In the last 4 years, the average annual improvement of tax revenue collection in Armenia was only 0.27 percentage points, which is even lower than the index recorded during the previous “robber” governments. They promised to increase taxes-GDP to 25 percent during this period. But they barely made it to 24.1 percent, underachieving by 0.9 percentage points. As a result, tens of billions of drams did not enter the budget. But no one is responsible for that.

It is not news that the efficiency of tax collection is determined not by how much tax is collected in nominal terms, but by how much tax is generated in relation to the GDP.

This is where the “progress” of the government is low. In 4 years, there was an improvement of only 1.1 percentage points, of which 0.6 percentage points were last year. In the previous 3 years, tax collection in the GDP increased by only 0.5 percentage points. In some years, the collection efficiency has even decreased, there has been an increase in shadowing. Let’s say in 2024 the budget promised an improvement of around 0.75 percentage points, an actual decrease took place.

If necessary, they will give a thousand reasons to justify what such “innocent” failures are the result of, but it is not an excuse and it does not increase the contents of the pocket of a socially insecure citizen.

They could not even reach the minimum 0.3 percentage point they set for the year, but they will talk for hours about the unprecedented performance of the tax revenues of the budget.

Of course, tax revenues have increased in nominal terms in these years, but they have increased primarily because, due to well-known external factors, independent of the will of the authorities, high economic growths have been recorded in Armenia. As a result of these increases, the GDP increased, contributing to the increase in taxes collected. Meanwhile, the results of the fight against lies and administration have been far from satisfactory.

Moreover, during this period, the recorded improvement of the tax collection index in relation to the GDP was not only at the expense of the administration, but also at the expense of increasing the tax burden on taxpayers.

In recent years, they have increased the widespread tax burden, especially on small businesses.

They doubled the turnover tax burden. Many businesses were removed from the field of turnover tax and transferred to the field of general taxation, which is much more difficult. Անգամներով, երբեմն՝ տասնյակ անգամներով տույժ-տուգանքներն են բարձրացել։ We are not talking about other aggravations. And after that, the efficiency of tax collection in the GDP improved by only 1.1 percentage points in 4 years.

This means that they have failed in their obligation to collect taxes in relation to the GDP. But they avoid talking about it. And they are trying to hide that fact behind nominal tax rates. In the case when it is more important, what was the level of tax collection in the GDP?

It is this indicator that they barely managed to increase by only 1.1 percentage points in 4 years. And it happened in a situation when high growths were recorded in the economy. There was economic activity, turnovers, sometimes even very sharp increases, sales and consumption volumes increased. But the tax system was not able to fully transform these increases into budget revenues and generate taxes from it. This means that the administrative reforms promised by the government have not been implemented, are delayed or do not work in the real economy.

When the authorities are unable to improve the quality of tax collection, they usually go for easier solutions: increase the debts or increase the tax pressure on the visible part of the economy. What the Armenian authorities have done. While the promised tax reforms could not be implemented, the debts have increased.

In the last 5 years, the government’s debt has increased by around 6.4 billion dollars.

During the entire history of the debt, it was 7.5 billion, in the past 5 years it was increased to 13.9 billion. They also increased the tax burden on business.

And the price of all that is paid by the citizen and the dutiful taxpayer.

HAKOB KOCHARYAN

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