A study of the impact of taxation on economic growth and the barriers to effective taxation in Armenia

Abstract

The topic of this MA essay is the impact of Taxation on economic performance of a country and the barriers to effective taxation in Armenia. The purpose of the study is to analyze the role of taxes in economic growth of a country and illustrate to what extent such obstacles as low investment, corruption, budget deficit and cumulative debt, high level of migration and unemployment, insufficient technology and lack of innovation, low industry growth and trade imbalance can/do hamper the economic development of Armenia, making ineffective the system of taxation. The study is based on the following hypothesis: “The system of Taxation in Armenia may affect the economic growth of a country, however, since such obstacles as corruption, budget deficit and cumulative debt unemployment, high level of migration, problems in industry such as lack of technology and innovation, low investment as well as a high trade imbalance in Armenia, the system of taxation won’t work efficiently.” The focus of this investigation is the impact of taxes on economic growth/GDP in Armenia since 1994 up to present days. The study takes into account national taxes. Also it includes several recommendations concerning the system of taxation and its efficiency. To reach a conclusion for the primary hypothesis, the following key points are analyzed in this study:

 Factors, which may be affected by the system of taxation negatively or positively.  Current economic situation in Armenia (the level of Real GDP, budget deficit, level of productivity, import/export rate, migration, unemployment)  The extent of growth in industry, export/import and investment in Armenia since 1994-2000.  The basic changes in the system of taxation in Armenia since 1994 up to present and their possible impact on the economy.  The most critical factors creating obstacles for the system of taxation to work effectively, i.e., the factors, which act as barriers to increased tax revenues for the national treasury.