The USAID Tax Reform Project Marks Completion, Leaves Behind a “Revolutionary Partnership"

For the past four years USAID has been working with the Ministry of Finance to transform Armenia’s tax regulations and the administration of the tax code to ensure increased transparency. USAID’s Tax Reform Project, started in 2012 to help modernize Armenia’s tax collection infrastructure to offer better and more efficient services to businesses and draw international investors to Armenia, has now been brought to a successful close.

“We believe we have built a strong foundation for addressing the needs of Armenia’s taxpayers, as a result of collaboration with the Ministry of Finance, the business community and donors,” said Jeffrey Paretchan, the acting director of USAID Armenia’s Sustainable Development Office.

Through the Tax Reform Project, USAID helped usher in a number of tangible improvements in tax administration, including IT system upgrades at the State Revenue Committee. In the past, taxpayers submitted tax declarations by mail, and their information was entered into the system manually. Now, with the Ministry’s modernization of the system, 96% of taxpayers can file electronically, compared to just 7% in 2011. This means more transparent tax operations and reduced opportunities for fraud and corruption. The time spent by businesses on tax compliance has also decreased by 38% thanks to USAID’s efforts. Finally, the number of audits in Armenia decreased by 40% between 2010 and 2016.

Through the Tax Reform Project, USAID also enhanced 16 Taxpayer Service Centers around Armenia, developed the Taxpayer Community of Practice web portal (www.taxnet.am), and helped develop a well-functioning call center which receives over 1,500 inquiries a day.

Thanks in part to these efforts, Armenia was able to achieve a 32-step improvement in the “Ease of Paying Taxes” ranking in the World Bank’s “Doing Business Report 2015.” Among the 189 countries examined, Armenia rose from 73rd place in 2013 to 41st place in 2014.

Another notable achievement of the project was the establishment of the Tax Council, a unique public-private platform for the government and the business community to discuss tax issues. Tax Council representatives include members from the Ministry of Finance, the State Revenue Committee, businesses, professional associations, the American Chamber of Commerce in Armenia, NGOs, and academia. According to Arsen Ghazaryan, president of the Union of Manufacturers and Businessmen of Armenia, “the (Tax Reform) Project is a result of a revolutionary partnership. Thanks to USAID, a new culture was created where the business community is a full member of the dialogue. This change in culture is the biggest achievement."

The Tax Reform Project is just one of USAID’s many projects to help Armenia improve its business environment, stimulate economic growth, and attract foreign investment.