The Government of the Republic of Armenia

Today, Prime Minister Karen Karapetyan visited the State Revenue Committee to get acquainted with the 2017 tax revenue performance, the work done by tax and customs authorities, as well as with the plans for 2018. The Head of Government noted that he was going to meet with all ministries and departments in order to sum up FY2017 and talk about the plans for 2018.

“The principles are the same this year: namely to provide a business-friendly environment, and set equal rules for law-abiding businessmen,” Karen Karapetyan said.

SRC Chairman Vardan Harutyunyan reported the amount of tax receipts in 2017, which amounted to AMD 1 trillion 201.6 billion, including the VAT refunds. This is 124.7 billion drams or 11.6% more than in the same period of the previous year. Without the VAT refunds, tax revenues amounted to 1 trillion 155 billion, which is 78.7 billion drams or 7.3% more than in the same period of 2016.

The SRC Chairman reported to the Prime Minister that in the course of 2017, the amount of VAT refunds amounted to over 60.6 billion drams, which is 24.6% or 12 billion drams up the index of 2016.

SRC First Deputy Chairman Karen Brutyan reported that in 2017, the tax administration improvement campaign mainly focused on the disclosure, prevention of tax fraud and the reorganization of the Tax Authority and neutralization of corruption risks.

An individual analysis and control system was introduced in 2017 for “large and medium” taxpayers, which allows the tax authority to prevent and expose the irregularities based on day-to-day observations and analyses.

A per-sector analysis and surveillance system has been introduced for “small” taxpayers, through which the tax authority identifies those taxpayers who deviate from the general pattern. Firstly, the taxpayer is offered to correct the conduct and to rule out further irregularities. In case of recurrent violations, no matter that the taxpayer is “small,” intensive control measures are carried out in order to curb the irregularities.

He noted that before operating structural changes, the functions reserved to tax inspectorates had been studied. It was revealed that, in some cases, inspectorates and tax inspectors had different workloads along with different quality of services, differed depending on the discretion and capacity of the inspectorate.

According to Karen Brutyan, based on these circumstances, the territorial tax inspectorates have been liquidated and the Tax Inspectorate of Small Taxpayers has been established. The Prime Minister was told that the risk standards were reconsidered to ensure that inspections were targeted. Moreover, the number of thematic audits was reduced by 25%.

Karen Brutyan added that the reform will be continued in 2018. “We expect to meet this year’s target through 10% growth, which can lead to 1 trillion 325 billion drams in tax receipts, as a result of which the growth of commercial taxpayers in the tax sector will be about 13%. Taking into account the 2017 dynamics and current statistics, we feel that the proposed target is realistic,” he concluded.

Assessing the target as quite realistic, Karen Karapetyan noted, “I think we will sum up the economic indices of 2017 by the end of January. At the moment, we can see that may be higher than we had planned in 2016. We have the necessary prerequisites to keep up this trend in 2018. That is to say, we have certain positive signals in economic terms, and we must do exactly what we have planmed.”

First Deputy Chairman of State Revenue Committee Samvel Avetikyan reported that 318 billion drams in State budget revenues were collected by the customs authorities, i.e. the increase in the customs sphere was 60 billion drams or 23.3%. According to him, customs revenues have increased mainly due to the increase in import volumes and sound administration.

“In pursuit of the Government’s recommendations, we have tried to create an atmosphere of mutual trust between the SRC and the business community, which resulted in last year’s satisfactory performance index. The rise in imports indicates that the business circles have the confidence that at any time there will be no barriers to importing goods.

Competition has also grown in business, as a result of which there has been a fall in the price of consumer goods, including household appliances, furniture, cars, etc.,” Mr Avetikyan said, adding that this year’s import indicators were exceptional as compared to the past few years, mainly due to simplified procedures and softer policy. As an example, he said that 39 thousand 270 cars were imported in 2017, while in 2016 this figure was only 16 thousand 887. As a result, more than 11 billion 660 drams was contributed to the State budget.

A number of measures have been taken in the customs sphere to improve the electronic platform, and the contacts of customs authorities and citizens have been significantly reduced to minimize corruption risks.

“The possibility of automatic release of the “green path” of electronic declaration, processing and release of customs declarations has been introduced in the Single Customs Automated Information System.

Due to the development of customs clearance receipts and electronic declaration of goods, customs formulations are implemented with the use of modern information technologies. Besides, according to Samvel Avetikian, the transaction price method was introduced in respect of goods imported from non-risk countries.

”There is a tendency of proper documentation for goods imported from the risky countries. As of December 1, 2017, the official website of the SRC has posted statistics pertaining to the first group of 250 products and the number of importers. Works is underway to publish data on all imported goods. The customs value of the vehicles by the customs system has been set already,” Mr Avetikyan said.

Karen Karapetyan welcomed the implemented activities, particularly in connection with the number of supplies and importers. “In fact, you have done a lot in 2018 and still have much to do. Cross-border trade should be made easier through clearly defined rules of the game, no barriers and delays. The liberal field will lead to higher economic activity, and we will definitely follow this path. We must regularly meet with business people and be sensitive to signals,” the Prime Minister said and instructed those responsible to raise the public’s awareness of the aforementioned improvements and positive changes as soon as possible.

SRC Deputy Chairman Armen Sakapetoyan reported to the Prime Minister that 25.5 billion drams have been levied in overdue tax and customs duties in 2017. He noted that the respondents’ constitutional rights were fully respected in the process of arrear collection, as a result of which the cases of judicial appeal were substantially diminished.

According to him, 50% of court cases have been recorded. It was also informed that a number of acts of the Criminal Code should be discredited, to review the sanctions provided for by them.

The Prime Minister welcomed and attached importance to the above initiatives and instructed them to closely work with other agencies to promote reforms as quickly as possible.

Deputy Chairman of State Revenue Committee Vakhtang Mirumyan singled out the exemption of machinery, equipment and raw material imports from VAT, noting also that VAT refunds were also provided to those working in the country.

”Special attention was paid to the field of micro entrepreneurship: 2000 self-employed persons were exempted from taxes; many taxpayers were relieved of fines and penalties in case of self-adjusting calculations. As a result of re-calculation, taxpayers paid additional tax of AMD 7 billion,” Vakhtang Mirumyan underscored.

He noted that with the aim of expanding the scope of foreign VAT reimbursement for foreign natural persons, the minimum threshold for purchases was reduced twice, setting 50,000 drams instead of 100,000 drams. As a result, for the export of goods purchased in Armenia in 2017, foreign citizens were refunded AMD 665,725.2 thousand on VAT amounts.

The Prime Minister was also informed that in April, 2017 a feedback system service was launched, allowing taxpayers to evaluate the quality of inspectorate’s response. A relevant survey showed that 73.5% of taxpayers positively assessed the service. A total of 156,767 inquiries were received by the center in 2017 concerning the applicable tax and customs regulations and administration. Reference was also made to the need for training tax and customs officers in order to improve their professional knowledge and work skills.

Summing up the consultation, Karen Karapetyan stated in part, “I appreciate the work done by the SRC in 2017, and I would like to thank you for your performance. We need to work hard in 2018, 2019 and 2020. Armenia should become an exemplary, much-coveted country in terms of business. If we secure this field, all other problems will be resolved as a derivative. I am confident that we can do that.”