Would you be more willing to pay taxes if you didn’t have to spend hours doing it, or if you see that money being used in the right way? Well, you are not alone.
Armenians, like people around the world, feel the same. According to the recently conducted Tax Perception Survey in the country, easier tax compliance and more visible link between taxes paid and public services received was found to be particularly important.
Between 66 percent and 75 percent of respondents said they would be more willing to pay more taxes if the procedures were easy and less time-consuming, if they saw more useful social and other public services, or if they saw less corruption.
Over 95 percent of respondents felt the tax burden is heavy or very heavy, while almost 50 percent reported that evading tax payments was not justified under any circumstances.
About 57 percent noted that high taxes or desperate financial situations were the main reasons for avoiding or evading tax payments.
The data unveiled by the latest Tax Perception Survey, carried out with USAID support and World Bank Group technical assistance covered around 1,500 households and 400 business taxpayers. The analysis strengthened the need to modernize the tax system, which has remained a major challenge for Armenia. Despite Armenia’s ranking as 37th in Doing Business, the taxation system, at 103rd on the list, still requires a lot of work.
To be sure, there have been some improvements to the system in the past few years. They include the introduction of electronic filing of tax returns, e-government applications, risk-based audit principles, and taxpayer service centers and appeal system. These achievements contributed to increasing the tax to GDP ratio from 19.5 percent in 2010 to 22.8 percent in 2013.
But much remains to be done to further streamline and simplify tax procedures, modernize the tax administration, and enact a tax code.
Important policy actions are also needed to broaden the tax base and fight tax evasion. Reducing the stock of tax credits, currently on the order of 5 percent of GDP, will release much needed working capital to support business expansion. Curtailing tax exemptions could also potentially add to Armenia’s tax-to-GDP ratio. The additional revenue could then be used to further finance social expenditures, such as health, education and social protection.
The Tax Perception Survey has become a powerful tool to promote broad-based policy debate, and inform and support tax policy and administration reforms. It has provided a benchmark for future reforms and transparency, while increasing accountability of the State Revenue Committee for results that reflect taxpayers' understanding and awareness of tax compliance, their perception of the role and duties of tax authorities, as well as the effectiveness of anti-corruption measures.
As a follow-up, the government has established a multi-stakeholder working group to capitalize on the survey’s results. The group’s priorities are, inter alia, to address the perceived incentives for tax payment vs. tax evasion; ensure that the tax system becomes simpler, user-friendly, predictable, and fair; and enhance the efficiency of public spending, which otherwise appeared to be a significant motive for poor compliance. The survey's findings will also help improve the World Bank’s outreach, better guide our policy dialogue, and sharpen our relevant technical assistance programs.