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Armenia Increases Taxes On Rich As 2012 Budget Passed

Armenian Prime Minister Tigran Sarkisian

Armenian Prime Minister Tigran Sarkisian

YEREVAN -- The Armenian parliament has approved a 2012 budget that is dependent on a roughly 13 percent rise in tax revenues, RFE/RL's Armenian Service reports.

Drafted by Prime Minister Tigran Sarkisian's cabinet, the budget was backed by 66 parliament deputies and rejected by two others in a vote that was boycotted by most of the deputies representing the opposition Dashnaktsutyun and Heritage parties on December 8.

Those parties have criticized the government for a too modest rise in social spending planned for 2012.

The budget commits the government to spending a total of 1.04 trillion drams ($2.74 billion), an increase of about 5 percent from this year's budget. Its revenues are projected to reach 911.6 billion drams.

The resulting budget deficit is to be equivalent to 3.1 percent of Gross
Domestic Product, down from about 4 percent forecast for 2011.

To that end, the State Revenue Committee will have to collect 101 billion drams in additional taxes, duties, and social security payments in 2012 to pay for the expenditures in the budget.

Committee head Gagik Khachatrian has repeatedly described this tax target as unrealistic.

But Sarkisian and Finance Minister Vache Gabrielian have dismissed
Khachatrian's objections. They say the SRC will be able to collect the extra revenues as a result of continued economic growth, improved tax administration, and fresh amendments to tax legislation that were also passed by the parliament on December 8.

The amendments are supposed to mainly target wealthy Armenians. In particular, they raised from 20 to 25 percent the rate of personal income tax for people earning 2 million drams ($5,260) or more a month.

The legislation will also lead to sharp rises in taxes on expensive cars,
alcoholic beverages, and casinos.

The government based its budgetary targets on the assumption that the economy will grow by 4.2 percent in 2012. Gabrielian admitted last month that a continued recession in Europe could slow that growth and thus complicate the planned increase in tax receipts.

Sarkisian likewise warned of a fallout from Europe's sovereign-debt crisis when he addressed parliament on December 6. "We are obliged to monitor global processes and take preemptive measures to minimize their impact [on Armenia]," he said.

Social security, education, and health care will absorb nearly half of the
projected government expenditures. The government is to spend roughly 200 billion drams on defense, security, and law-enforcement and around 47 billion drams on debt servicing.