OBSERVATION 3. State Budget: The illusion of tax growth and a sharp decline in “productive” taxes

When discussing the state budget, the figures are often presented as one of the most important proofs of economic success. If tax revenues grow, authorities present this as confirmation of economic growth։

However, the structural data of the budget reveals a much more important question՝ what kind of economy are those taxes collected from։

The January 2026 state budget data shows an interesting contradiction: total tax revenues are increasing, but one of the key “productive” taxes՝ corporate profit tax՝ is sharply declining։

In other words՝ the figures indicate not production growth, but a tax system formed through consumption and wages։

1. The overall picture of the budget
In January 2026, state budget revenues amounted to 256.4 billion drams, while expenditures were 151.4 billion drams

Revenues increased by 7.5% compared to the same month of the previous year։ At first glance, this may seem like a positive development. But when examining the tax structure, the picture changes

2. Corporate profit tax․ the real indicator of production

Corporate profit tax is one of the taxes directly linked to business profit and productive activity

In January 2026, profit tax revenues amounted to 6.98 billion drams, whereas in January 2025 they were 17.99 billion drams։ This means a decrease of about 61%

Such a sharp decline is difficult to reconcile with statements about economic activity growth

3. Budget growth driven by wages and consumption

At the same time, taxes related to wages and consumption have increased

In January 2026, personal income tax amounted to 76.1 billion drams (+19%)

Turnover tax amounted to 18.6 billion drams (+20.6%), VAT amounted to 92.7 billion drams (+6.8%)

These three taxes together form the main growth of the budget. This shows a structural feature of the budget

tax growth is formed through consumption and wages, not through production and profit growth

4․ Sharp decline in capital expenditures

The expenditure structure of the budget also shows an important trend

In January 2026, expenditures on non-financial assets (i.e., investment or capital expenditures) amounted to only 6.1 billion drams, whereas in the same month of the previous year they were 18.6 billion drams

This means a decline of about 67% in capital expenditures. In other words՝ the state significantly reduced investment spending at the very beginning of the year

5. Expenditure structure․ growth of social spending

At the same time, social payments have sharply increased

In January 2026, social benefits and pensions amounted to 103.9 billion drams (+47%)։ The share of social spending in the budget increased to 45.7%

This means that in the structure of the budget, social transfers continue to dominate over investment expenditures

Conclusion

The January 2026 budget data shows an important structural reality

Although tax revenues are increasing, this growth does not come from increased production, nor from increased business profits

Thus, the budget figures show that Armenia’s economic tax base continues to be consumption-driven, rather than based on production and investment