In this last period the authorities do their best not to miss any chance to make us happy. I don’t mean the Erebuni-Yerevan or other concert programs. For instance in spring the finance and economy minister of Armenia happily announced that the Gross Product mark was already higher than the same mark of Soviet Armenia. And now the authorities are happy to publish the budget of 2006. Next year we are going to have a budget, which will be more than 1 billion USD. At the same time the income mark of the budget is close to 1 billion, and the expenses mark is higher by 65 billion dram. The Budget Draft can have both positive and negative developments. In parallel to the economical growth, the budget has also growth of deficit. I.e. every year we spend more money than we earn. The budget deficit of 2003 was equal to 1,3 % of GDP, and in 2004 – to 1,7 %. It is supposed that this year it will be more than 2 %. And as for 2006, the government expects this mark to be about 3 %. The budget drafts of the past years contained exact information regarding the concrete ways to cover the deficit of the budget. Usually it had one main source of covering that deficit: loans. This year only the half of the deficit will be covered by loans. The 48 % of the deficit will be covered on the basis of domestic income sources. There is a line for “other domestic income sources” in the budget. This line expects to have about 26,5 billion dram income. There is no information in the draft about what kind of source that is. I suppose they mean the income that they got from privatization. After the privatization of “Agarak Cooper and Molybdenum Factory” they have about 70 m. dollars on their account. Probably the government is going to spend this money with the purposes to cover this deficit. We must already agree that these past years the documentation of the government is made and prepared more carefully. For example it is written in foreign economical analysis that we expect import to be increased by 25 %, and they have accordingly increased the tax rate for that much.
Recently some tendencies in the income part of the budget have been stabilized. The budget incomes are going down in comparison to GDP. During the last years this mark has been decreased from 20 % to 16 %. Thus we can say that the economic development process is faster than the taxations. The draft expects to have not only indirect taxes(VAT, Customs taxes, excise), but also direct taxes. They expect to have 16 % increase of income tax. Income tax increase is a positive factor for development. In parallel to positive developments there are negative developments too, and it is clear that these negative problems are not worked out in a duly manner. The main part of tax income is provided by indirect taxes (about 75 %). This means that the government agrees that the legislation and management aren’t developed enough. Accordingly we can say, that the activities in the taxation field are not led by economical calculations, but by the method of taking money. This approach seriously prevents the field from development. This is not the first year that businessmen complain about the method and capacity of imposing VAT. Environmental protection and usage payments are known for their low level in the income part of the budget. They expect to have 10 billion dram here. The growth may be very big compared to last year. But this sum increase is mainly caused by road payments increase. Accordingly we can say that environmental field is still one of the fields that are not “taxed well”.
The most surprising thing of the 2006 budget prediction concerns economical development. Our authorities are proud of the two-number growth of our economy. During these last years the state statistics service announced 14, 10 and 11 % marks in their report. Please note that this 11 % mark has not been announced yet, it is just predicted. This mark will be presented together with the final economical report of 2005. Instead of this the authorities have let the government present one-number economical (this is very strange) development mark in 2006. This number is calculated as 7,5 %. The logical concept of the expense part of the budget draft has been changed in comparison with the drafts of the last years. I didn’t mention that because of two reasons: 1. during these last years the income part of the budget doesn’t have any serious changes during the parliamentary discussions, 2. the expenses part of the budget is changed in case a political group manages to take money from other fields and distribute more minister positions among their party representatives. That is why it is worthy to discuss the income part of the budget after it has been adopted by the NA.