YEREVAN, January 21, /ARKA/ The U.S.-based Heritage Fundation has rated Armenia’s economic freedom score 69.2, making its economy the 38th freest in the 2010 Index. Its overall score decreased by 0.7 point from last year. Armenia is ranked 21st freest among the 43 countries in the Europe region, and its score puts it above the world and regional averages.

According to Heritage Foundation’s report, Armenia has implemented substantial economic reforms in many parts of its economy over the past decade, making considerable gains in income growth and poverty reduction while maintaining macroeconomic stability.

Low tax rates and moderate government spending contribute to an impressive degree of fiscal freedom, it said. However, widespread corruption and weak protection of property rights continue to reduce Armenia’s overall level of economic freedom. Burdensome bureaucratic procedures and discretionary decisions by individual officials encourage petty corruption. Sluggish structural reforms also keep the Armenian economy from diversifying its productive base.

Starting a business takes an average of 15 days, compared to the world average of 35 days. Obtaining a business license requires about the world average of 18 procedures and less than the world average of 218 days. Armenia’s weighted average tariff rate was 2.3 percent in 2008. Excise taxes and fees, inadequate infrastructure, unpredictable customs valuation, inefficient customs administration, weak enforcement of property rights, import monopolies, and corruption add to the cost of trade. Fifteen points were deducted from Armenia’s trade freedom score to account for non-tariff barriers.

Armenia has relatively low tax rates. The top income and corporate tax rates are 20 percent. Other taxes include a value-added tax (VAT) and excise taxes. In the most recent year, overall tax revenue as a percentage of GDP was 16.5 percent. In response to a dramatic shortfall in tax revenue in early 2009 (due in large part to low collection of VAT and profit taxes), authorities announced intentions to improve tax administration through major policy changes in 2010.

Total government expenditures, including consumption and transfer payments, are low. In the most recent year, government spending equaled 17.4 percent of GDP. Authorities have been forced to limit nonessential spending but are still not meeting expenditure targets.

The list of freest economies is topped by Singapore, Australia, New Zealand and Ireland. Russia was rated 143rd, Georgia was 26-th and Azerbaijan 96-th. M.M. -0-