The recent developments in Armenia’s tax policy are often presented as an “evolution” — a process of introducing modern methods and modernizing the system. However, this process is frequently not accompanied by a strengthening of economic policy and is moving in a dangerous direction, deepening the mismatch between tax administration and the real economy.
Evolution With a Negative Logic
According to former Chairman of the State Revenue Committee Davit Ananyan, tax collection and ensuring budget revenues are ongoing processes with clearly defined tools. However, their effectiveness largely depends on the state of the economic environment.
“Tax collection and ensuring budget revenues are continuous processes that must proceed within the logic of economic development. When the economic environment does not develop sufficiently, but tax collection indicators remain unchanged and assume annual growth, tax administration starts moving in a stricter direction,” Ananyan notes.
He explains that in such a situation, tax authorities are forced to apply harsher mechanisms, regardless of the real economic potential. If political instability is added to this, the use of operational and investigative methods by tax bodies sometimes acquires not only economic but also political overtones.
Promises Without Economic Potential
Ananyan compares the economic situation to a family structure:
“The country is like a big family. Leaders have promised that a certain amount of money will be collected, but the family’s real income potential does not reach that level. Nevertheless, they try to fulfill these promises regardless of the actual economic possibilities.”
As a result, a budgetary policy is formed in which indicators are set from the top down, without considering the structural characteristics of the economy and its real growth potential.
Consequently, tax authorities are forced to “collect” the promised amounts not through economic growth, but by tightening administrative measures.
Absence of Economic Policy as a Systemic Root
According to Ananyan, the problem is not limited to the tax sphere — it is deeper and connected to the actual absence of economic policy.
“Look, there is an economy, there is economic policy, and there is its macroeconomic component. Only after that should fiscal and tax policies come into play. This is a logical chain. When real economic policy is not pursued, macroeconomic, fiscal, and monetary policies operate only within their limited frameworks, without systemic connections,” he emphasizes.
The break in this chain leads to tax policy remaining without strategic direction and turning into a purely fiscal tool.
The Primacy of Fiscal Goals
When tax policy is deprived of an economic strategy, it focuses exclusively on ensuring budgetary indicators.
“For example, if fiscal policy has set that a certain percentage of GDP must be collected in taxes, tax authorities begin to implement strict administration to achieve that figure,” says Ananyan.
Within this approach, the following steps are taken: limiting the opportunities of microbusinesses, increasing pressure on those operating under the turnover tax regime, and raising the tax burden in various areas.
According to Ananyan, the recent tax changes are based solely on the pursuit of fiscal goals rather than on stimulating economic growth.
“We have an economic policy that exists only on paper — or does not exist at all. Fiscal policy is limited by its own rules, and tax policy pursues only the goal of ensuring revenue,” he concludes.