Armenia Launches Unconventional Tax Crackdown

by Mary Swire, Tax-News.com, Hong Kong

09 February 2009

Armenian Finance Minister Tigran Sargsyan has warned that the government will face major challenges in 2009 as a result of tax evasion.

“We are quite aware that 2009 is going to be the toughest year for us, with the global crisis changing the situation and causing major hurdles in tax collection,” Sargsyan said, speaking on February 4, urging members of the government to enforce Armenia’s tax collection program, which looks to crack down particularly on VAT evasion by small enterprises and street sellers.

Alongside customary measures, the government has launched other less conventional initiatives. The Armenian government is offering substantial cash prizes to consumers who receive receipts for their purchases, to try to encourage consumers to buy from legitimate sellers who use cash registers. It is hoped that this will reduce the significance of the country’s grey market, which currently accounts for around a third of all economic activity.

The initiative was introduced at the start of the year, after the threat of prosecutions failed to encourage shop owners to install cash registers and provide receipts.

Those who purchase goods or services and obtain a receipt from a trader with a cash register stand to win as much as AMD5m (USD11,200). The initiative works much like a lottery, where consumers compare the eight-digit number on their receipt to an eight-digit number drawn monthly to determine whether they have won, and if so, how much.

The government expects that the initiative will increase government revenues by as much as USD16.5m, and encourage consumers to use legal sellers, in the hopes of forcing tax evaders into reluctantly conforming to Armenia’s tax laws.

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