IMF Advises Armenia To Broaden Tax Base

By Tatiana Smolenska, Tax- News.com, Moscow

02 January 2015

Armenia's plan to formulate a comprehensive tax code is an opportunity to broaden the tax base and increase revenues, the International Monetary Fund (IMF) has said.

It said that higher tax revenues are needed to fund increased social spending and spending on growth-enhancing infrastructure projects. Improvements to the tax system should aim to eliminate gaps and ensure greater equity, it said.

The IMF noted that Armenia may receive extra revenues from the Eurasian Economic Union's (EEU) common customs pool, but EEU tariffs are expected to decline over the medium term. It commended what it called the authorities' "cautious approach" to evaluating the sustainability of these additional revenues prior to incorporating them in the budget.

The IMF said that, at present, fiscal stimulus policies are appropriate, given the nation's low fiscal deficit, but fiscal tightening may be needed if the outlook for the country worsens. It noted the importance of continuing to strengthen the capacity of the tax authority.

The comments appear in the IMF's first review of Armenia's economic performance as part of a three-year program under the Extended Fund Facility (EFF). The review's completion enables the release of about USD17m, bringing total disbursements under the arrangement to USD34m.

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