Our government has a talent to show the rates and any information in a manner to show as an achievement. It is not about the TV news programs because they are very simple. For example, they find one good thing in a big statistical report and build their reportage on this one small good thing and forget about the rest. For example, they find in the June publication that the construction has grown by 130%, find optimistic people and interview them. However, they don’t discuss the most important information in the report, which shows that there has been 16% economic decline.
However, the government is not so primitive as TV news programs and they don’t hide the bad informat6ion as they understand that everyone may get this information from newspapers or other sources. The government is manipulating the figures and information more professionally. They are manipulating the information in a manner to make it very difficult for ordinary citizens to understand the deal. For this purpose it is better to use financial, tax collection and budget issues and terms because these are more complicated and difficult to understand. Most of people accept and understand this information in the same manner as it is broadcast and introduced by TV companies. Let’s bring an example together with several rates which have been left out of the “optimistic campaign”.
The ministry of finance has published the resume of budget implementation for January-July 2009. During January-July 2009 the state budget incomes amounted 359 billion dram, and the expenses covered 426.5 billion. Compared to the same period of the previous year the budget incomes reduced by 13.3%, which is equal to 55 billion dram. The 77.8% of the state budget was composed of taxes and duties, 15.8% – of compulsory social payments, 5.6% – of other payments, and 0.8% – of official grants. During January-July 2009 over 279.2 billion dram was collected into the state budget as tax and duty payment, which was by 18.1% (or 61.5 billion dram) less compared to the same period of the previous year. These indicators show that the tax and duty payments collection capacity was reduced with the same rate as the economic decline.
In consideration of the mentioned information, we see that the tax and duty payments have reduced by 18.2% or 51.8 billion dram during the first half of this year. The economic decline in this period reached 16.3%. Thus, in the first part of the year the reduction of the tax and duty collection capacity was higher than the economic decline. As for the first four months of the year, these two rates were equal for that period. In fact it may be considered as a positive tendency in the tax collection policy. However we were surprised to see that no one was praising the work of the tax collection bodies, while in the past month the prime minister did his best to raise the work of the taxation bodies and encourage them.
It is very surprising why the government is keeping silence now and was so active last month. It is worth mentioning that the prime minister pointed out on the fact that the capacity of income tax collection was increased as well. It is not understandable what did June differ with, especially when we look at the monthly reports of the finance ministry. According to these monthly reports, during the period of January-June the capacity of income tax in tax collection was less (19.4%) than during January-April (19.9%) and January-May (20.3%). However there is another problem, which we would like to discuss. One month ago the prime minister pointed out on the fact that the capacity of income tax in the tax collection was equal to 11.9%, but during the six months of this year this rate has grown by several points. It was introduced as a surprising positive tendency. “It seems that there should not have been such situation. If we have economic decline, it means that we should have problems with the income tax of companies and its capacity should be cut down. But the situation has changed and the capacity of the mentioned income tax has increased due to cutting down the shade in the economy,” said Tigran Sargsyan.
Neither the media nor experts paid a due attention to this statement. However, everything is very simple and the situation has not changed, and it is not about income either. The reason is the legislation, namely the law on income tax collection, the 47th provision of which writes that during the year the taxpayers should make income tax payments. The prepayments are paid every month, with the amount of 1/16 of the previous income tax. Certainly it is not binding on new taxpayers and those which have not had income subject to taxing during the past year, or whose income tax amount of the previous year did not exceed 500k dram, but in fact it does not change the big picture. The addendum to the 47th provision writes that the mentioned prepayment cannot be less than 1% of the previous month’s income.
We shouldn’t dig in the tax laws because the laws are so complicated that even professional accountants sometimes can’t work it out. To say in a simple language, the tax legislation writes that even if businesses are not profitable and have losses, they should pay income tax. For example, if X company paid 16 million dram to the state budget in 2008, then this company must pay 1 million dram to the budget every month, even if this company has losses. It turns out that the law makes many companies, which are not profitable and are having losses, to make income tax prepayments, and this is the money which goes to the budget and is included in the official statistics. The government takes this information and speaks of economic growth, change of situation and reduction of shade in the economy. We wonder whether this is done on purpose or it is the way how the top officials and leaders are making their mind and conclusions.