In 2022, AMD 261.9 billion was returned to taxpayers from the state budget for VAT, income tax, and excise tax, which is 45.3% or about AMD 82 billion more than last year. If the refunded amounts were included in the state budget revenues, then the increase in tax revenue in 2022 would have been 24%, instead of the recorded 21%.
Tax refunds increased by 45.3%
According to RA legislation, the state periodically returns a part of the value added tax (VAT), income tax and excise tax paid to the state budget to taxpayers. For example, the state compensates the exporters for the paid VAT amounts or returns the income tax amounts paid to the state budget in the amount of interest paid on the mortgage loan.
In 2022, about AMD 262 billion were returned to taxpayers from the state budget. Compared to 2021, this amount has increased by 45.3% or about AMD 82 billion. Most of the refunds are for VAT and income tax. In particular, in 2022, the VAT refunds amounted to about AMD 213 billion or 81% of the total refunds, the income tax refunds amounted to AMD 47.4 billion or 18%, and the excise tax refunds amounted to AMD 1.7 billion, which is 1% of the total refunded amount.
Income tax refunds have increased 10 times in the last 5 years
In 2022, AMD 47.4 billion were returned to taxpayers in terms of income tax. Compared to the previous year, this amount increased by 45.4% or 14.8 billion drams.
Most of the income tax refunds is the amount of income tax returned to borrowers and co-borrowers in terms of interest paid for the servicing of a mortgage loan for the purpose of purchasing an apartment or building a private residential house. Moreover, the amount refunded in this regard and the number of beneficiaries have increased dramatically in recent years. In 2022, AMD 36.5 billion of income tax was refunded for mortgage loans, 60.5% or about AMD 14 billion more than in 2021 and about 8 times more than in 2018. In 2022, the number of beneficiaries of the income tax refund was 29 thousand, while in 2017 it was only 2,400.
Despite the fact that from 2022 restrictions have been introduced in the income tax refund program for mortgage loans, the money returned from the state budget continues to grow at a high rate.
VAT refunds have increased 3 times in the last 5 years
In 2022, about AMD 213 billion were refunded to taxpayers in terms of VAT. Compared to the previous year, this amount increased by 45% or AMD 66 billion.
Refunded VAT is almost entirely the VAT refunds to exporters. To encourage exports, the RA government returns the amount of VAT paid to the exporters within a month. The refunds in this regard have increased significantly in recent years. In particular, the amount of VAT refunded to exporters in 2022 amounted to about AMD 212 billion, 45% or about AMD 66 billion more than in 2021 and about 3 times more than in 2018.
In summary, if in 2022 the amounts refunded for VAT, income tax and excise tax were included in the state budget revenues, the increase in tax revenues and state duty would have been 24% instead of 21%.
This article was prepared by the Armenian Center for Socio-Economic Studies (ACSES) with the support of the Open Government Partnership through the EU for Integrity Programme for the Eastern Partnership, funded by the European Union. Its contents are the sole responsibility of ACSES and do not necessarily reflect the views of OGP or the EU.