YEREVAN, NOVEMBER 1, NOYAN TAPAN. Depsite the high growth rate of its economy, Armenia is in one of the last places among transitional economes by its taxes/GDP ratio. Chairman of the Central Bank of Armenia (CBA) Tigran Sargsian said this during the 2007 draft state budget's discussion in the RA National Assembly standing committees on November 1. According to him, in 2007 the government plans to increase the tax collection to 15.6% of GDP, which is by 1.1% more than in 2006. Taking into account that a 0.4% annual growth in the ratio of taxes/GDP has been programmed in recent years, a 1.1% growth planned for 2007, according to the CBA Chairman, creates serious problems for the government. He said that in order to achieve this index, the government will submit to the NA a legislative package, whose purpose is to reduce considerably the share of shadow economy and improve tax administration. Particularly, the package includes measures aimed at reducing the dollarization and the amount of cash in circulation. Some laws proposing new instruments to fight against the shadow economy and improve the competition atmosphere will also be submitted to the parliament. T. Sargsian said that the government had considered it expedient to plan an inflation of 5% plus-minus 1.5% for 2006. An inflation of 4% plus-minus 1.5% is programmed for 2007, while in 2008, it will return to 3%. In his words, the cause of more than 3% inflation is the increase in the prices of some goods, particularly fuel and bread products, on international market in 2006. The CBA Chairman noted that the settlement rate of 1 US dollar of 357 drams in next year's state budget has no relation to calculations of the market exchange rate. "This is not the exchange rate that is formed in the market, but the one allowing to express the budget's foreign currency revenues and expenditures in drams," he explained. He attached importance to this idea in terms of not sending wrong signals to the public and economic entities. He added that the government has calculated this index based on the programmed financial flows and the macroeconomic indices.

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