Dear colleges
On way of my professional carrier enlargement, I have tried to make research in several fields, such as financial and managerial accounting, taxation, auditing, and also education administration. The selected published articles related to my research framework are presented below.
1. Migration Risks Influence on Human Capital Reproduction in
Armenia
2. DEFFERD TAX ACCOUNTING: US-ARMENIA
COMPERATIVE ANALYZING
3. REGIONAL ECONOMY DEVELOPMENT ISSUES IN
ARMENIA
4.PRO-CYCLICALITY IN THE BASEL III FRAMEWORK
http://media.asue.am/upload/23rd_gitajoxov/2.pdf
5.Strategic Management Accounting Functions in Agribusiness
6.MANAGERIAL ACCOUNTING ISSUES IN AGRICULTURAL
HOLDINGS http://www.anau.am/images/stories/journal/4_2013/4.2013_Eco.pdf
7.TAX PLANING ISSUES IN UNIVERSITES OF ARMENIA
http://paara.am/wp-content/uploads/2012/04/Mas_1_HK-2014-1-2.pdf
8.BOLOGNA MOTIVES IN THE CONTEXT OF
GLOBALIZATION http://jrtmed.uccm.md/ind
9.BOLOGNA PROCESS SOCIAL - ECONOMIC
CONSEQUENCES
10. BIOLOGICAL ASSETS MESSURMENT APPROACHES
http://www.anau.am/images/stories/journal/2_2009/Eco_2_2009/96-102_02_2009.pdf
Harutun Marzpanyan, prof. Doctor of Economy Science
Yerevan State University, email : hmarzpanyan@ysu.am
Armen Tshughuryan, prof. Doctor of Economy Science
Northern Yniversity of Armenia, email : Jarmen1@yandex.ru
Migration Risks Influence on Human Capital Reproduction in Armenia
ABSTRACT
Human capital reproduction process is becoming actual on period of active mobility labor forces and integrations inter regional markets. The process of formation scientific based economy is bringing new challenges for using efficiently human capital, making optimal investments in relation to enlargement skills, ability and quality assurance of employment forces. However, the human capital reproduction process includes migration impact risks, concerning to manpower drain from developing countries, reevaluations of employability demands in labor markets, which is more obvious in Armenia. In fact, the country has faced tremendous social economy changes in post independence period. The substantial changes in economic and social sphere of early 1990's had a direct impact on human capital reproduction process through demographic situation in Armenia.
The basis of human capital is people, and for that reason, the key factor that influences the size of a country’s stock of human capital is demographic. The reasonable level of human capital stock can be promoted or limited primarily by population. In addition, the characteristics of population (for example, it’s a geographic orientation) have a large influence on the potential stock of human capital–both for today and in the future. Besides, the process of social transformation in Armenia was accompanied by a considerable devaluation of human capital, which had been accumulated and generated in previous socialistic area. In post independence period Armenia has broken of well founded economic relations with former Soviet Union Republics and start revise long-established economy sources. As a results this massive condemnation effected on quantity and quality level of employability and the accumulated part of human capital came under reevaluation and reconsideration.
Mobility is an essential feature of today’s world, and migrant workers are now an increasingly vital part of the global workforce. The article seeks to provide strategic overview on how well country are leveraging reproduction of home accumulated human capital and establishing workforces that are prepared for the demands of competitive economy.
Key words: recognition of human capital, human capital disbandment, labor forces mobility, migration and human capital interrelation, migration risks, peculiarities of human capital
reproduction
Human Capital Recognition Issues
Capital historically defined economic relations regarding things, the attitudes about the changes in their value, i.e. their capitalization. The literature review is performing, that the main accepted approach in economics views human capital as a set of skills/characteristics that increase a worker’s productivity. Human capital refers to the stock of skills and knowledge embodied in the ability to perform labor so as produce economic value, formed as a result of investment and accumulated human's health, knowledge, skills, abilities, motivations which are expediently used during the process of labor, contributing to human's productivity and wage increase. Human capital theory studies the process of qualitative improvement of human resources, forming one of the central divisions of modern labor supply analysis. Schulz explained his concept in 1981 as follows: „Consider all human abilities to be either innate or acquired. Attributes which are valuable and can be augmented by appropriate investment will be human capital,“ (Schulz, 1981). Bontis, Dragonetti, Jacobsen and Roos suggested a more detailed definition in 1999: „Human capital represents the human factor in the organization; the combined intelligence, skills and expertise that gives the organization its distinctive character. The human elements of the organization are those that are capable of learning, changing, innovating and providing the creative thrust which if properly motivated can ensure the long-term survival of the organization,“ (Bontis, Dragonetti, Jacobsen & Roos, 1999).
In theory most frequently it is used as a synonym of human resources, employees, labor force or even of labor resources population (people in the working age) generally. Accordingly the term was used in connection with the shift from understanding employees as the cost item of organization to understanding them as the assets, the most important part of wealth of organization, the disposable capital, which value is possible to increase, e.g. through investing in employees training and development.
In practice business framework, human capital is the economic value of an employee’s set of skills, with self reproducing capabilities. Nevertheless, for the policy maker, human capital is the capacity of the population to drive economic growth. Conventionally, from both sides, human capital has been viewed as a function of education and experience, the latter reflecting both training and learning by doing. But in recent years, health (including physical capacities, cognitive function and mental health) has come to be seen as a fundamental component of human capital. Additionally, the value of human capital is critically determined by the physical, social and economic context of a society, because that context determines how particular attributes a person possesses may be rewarded (The Human Capital Report, 2013).
Human Capital Measurement and Ranking
More to the point of human capital recognition, it is also issue of human capital measurement. Because of various structural components, practically it is complicated to asses and quantitative present human capital stock, is more acceptable measurement of this value using by aggregate approach. However, the Human Capital Index is a new measure for capturing and tracking the state of human capital development around the world and measures a broader set of indicators than the traditional definitions of human capital. The Human Capital Index seeks to create greater awareness among a global audience of human capital as a fundamental pillar of the growth, stability and competitiveness of nations.
According to World Economic Forum implemented methodology the four pillars is included in human capital measurement Index.
1. The Education pillar contains indicators relating to quantitative and qualitative aspects of education across primary, secondary and tertiary levels and contains information on both the present workforce as well as the future workforce.
2. The Health and Wellness pillar contains indicators relating to a population’s physical and mental well– being, from childhood to adulthood.
3. The Workforce and Employment pillar is designed to quantify the experience, talent, knowledge and training in a country’s working–age population.
4. The Enabling Environment pillar captures the legal framework, infrastructure and other factors that enable returns on human capital.
The advantages of human capital index as a measurement tool are obviously from different point of view. This indicator enables us to think of not only the years of schooling, but also of a variety of other characteristics as part of human capital investments. These include school quality, training, attitudes towards work, etc. Using this type of reasoning, it is possible to make some progress towards understanding some of the differences in earnings across workers that are not accounted by schooling differences alone.
In Human Capital Detailed world ranking table Armenia is taking 73 position within 122 countries (see table 1). The top ten countries are dominated by the European countries, with eight of the top ten spots occupied by countries from this region. Switzerland (1) tops the rankings for the Human Capital Index, demonstrating consistently high scores across all four pillars, with top spots on Health and Wellness and Workforce and Employment, second place on Enabling Environment and fourth on Education (The Human Capital Report, 2013).
Nevertheless, ranking position structural analyzing by separate pillars is performing, that workforce and employment is the less competitive components in human capital configuration in Armenia (see figure 1), and the more influence factors for dropping of this indicator is employability level in various social demographic groups (see table 2)
Table 1 Brief Performance of Detailed Ranking of Human Capital Index (2013)
Country Overall index Education Health and wellness Workforce and employment Enabling environment
Rank Score Rank Score Rank Score Rank Score Rank Score
Switzerland 1 1.455 4 1.313 1 0.977 1 1.736 2 1.793
Finland 2 1.406 1 1.601 9 0.844 3 1.250 1 1.926
Singapore 3 1.232 3 1.348 13 0.762 2 1.345 5 1.471
Netherlands 4 1.161 7 1.106 4 0.901 8 1.150 4 1.484
Sweden 5 1.111 14 0.977 2 0.960 6 1.154 10 1.351
Germany 6 1.109 19 0.888 8 0.877 9 1.149 3 1.522
Norway 7 1.104 15 0.970 6 0.890 5 1.182 8 1.373
UK 8 1.042 10 1.031 17 0.682 10 1.072 7 1.384
Denmark 9 1.024 18 0.891 3 0.943 12 0.932 11 1.330
Canada 10 0.987 2 1.355 20 0.548 15 0.875 17 1.168
------------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Armenia 73 –0.218 60 0.042 71 –0.035 113 – 0.678 64 –0.201
Table 2
Structure of “Workforce and Employment” Indicator in Armenia (2013)
Pillar 3 Rank/122 Z-Score Country Value Sample Minimum Sample Maximum
Participation
Labour force participation rate, age 15–64 (%) 96 -0.561 63.7 43.4 90.6
Labour force participation rate, age 65+ (%) 47 -0.018 24.3 1.6 91.2
Economic participation gender gap 69 -0.009 0.645 0.310 0.839
Unemployment rate 103 -1.959 19.0 0.3 32
Youth unemployment rate 103 -2.765 45.5 1.6 48.2
Talent
Country capacity to attract talent 93 -0.857 2.56 1.48 6.08
Country capacity to retain talent 103 -0.937 2.62 1.81 5.97
Ease of finding skilled employees 88 -0.607 3.56 2.13 5.69
Pay related to productivity 31 0.672 4.33 2.37 5.25
Capacity for innovation 66 -0.327 3.44 2.31 5.84
Firm level technology absorption 84 -0.638 4.36 3.17 6.23
Scientific and technical journal articles (per 1,000 people 53 -0.451 0.053 0 1.242
Median age of the working population 54 0.074 35 28 42
Training
Staff training 88 -0.751 3.56 2.51 5.57
Training services 106 -1.055 3.47 2.67 6.47
Human Capital Reproduction Peculiarities’
Not only the human capital, but as well its reproduction are phenomena, which sizes are difficult to determine and it is impossible to measure and quantify them using methods applied in population statistics or in other disciplines. It is understandable, what the quality of human capital and its reproduction consists in. However, in the interests of development of extended human capital reproduction it is necessary improvement of quality of upbringing and education young people and on employees training and development, support of acquiring new experiences, support of sharing knowledge and skills, full utilization of potentials of people, and last but not least, improvement the working life quality. This resource must be invested in and leveraged efficiently in order for it to generate returns, for the individuals involved as well as an economy as a whole. Additionally, despite high unemployment in Armenia, the global economy is entering an era of talent scarcity that, if left unaddressed, will hinder economic growth worldwide. Understanding and addressing challenges related to human capital is thus fundamental to short term stability as well as the long term growth, prosperity and competitiveness of nations (The Human Capital Report, 2013). However, it is considerable „accounting“ approach to these activities, because practically is possible to measure the expended costs, but unfeasible ascertain in full any final effect of the costs and thus measure it.
It is useful to think of the possible sources of human capital differences before discussing the incentives for reproduction of human capital. The one of main important factors is innate ability. Workers can have different amounts of skills/human capital because of innate differences. The relevance of this observation for labor economics is twofold: (i) there is likely to be heterogeneity in human capital even when individuals have access to the same investment opportunities and the same economic constraints; (ii) in empirical applications, we have to find a way of dealing with this source of differences in human capital, especially when it’s likely to be correlated with other variables of interest.
Another important factor for human capital reproduction is schooling. This has been the focus of much research, since it is the most easily observable component of human capital investments. However, the assessment of schooling impact is likely to be very informative if will to consider, that the same forces will affect schooling investments are also likely to affect non-schooling investments. Who grew up in the same environment until the age of 6, and then completed the same years of schooling may nevertheless have different amounts of human capital. This could be because they attended different schools with varying qualities, but it could also be the case even if they went to the same school. In this latter case, for one reason or another, they may have chosen to make different investments in other components of their human capital (one may have worked harder, or studied especially for some subjects, or because of a variety of choices/circumstances, one may have become more assertive, better at communicating, etc.). Many economists believe that these “unobserved” skills are very important in understanding the structure of wages (and the changes in the structure of wages).
The essential component of human capital reproduction is training. At some level, training is very similar to schooling in that the worker, at least to some degree, controls how much to invest. But it is also much more complex, since it is difficult for a worker to make training investments by himself. The companies also needs to invest in the training of the workers, and often ends up bearing a large fraction of the costs of these training investments. The role of the firm is even greater once we take into account that training has a significant “matching” component in the sense that it is most useful for the worker to invest in a set of specific technologies that the firm will be using in the future. So training is often a joint investment by companies and workers, complicating the analysis.
Figure 1 Human Capital index Structural Performance in Armenia (2013)
The most deteriorating point in human capital implementing process in Armenia is workforce ineffective usage and higher unemployment rate, which is a considerable in human capital index assessment (see figure 1). Consequently, in human capital reproduction development in Armenia currently essential to give more attention for activating macro economic tools for remodeling human capital structure, such as post educational trainings, long life learning, employee over qualification in companies, which will to meet and satisfy the requirements of labor market.
The presumption that all pay differences are related to skills (even if these skills are unobserved to the economists in the standard data sets) is not entire realistically in Armenia by following reasons.
• compensating differentials: a worker may be paid less in money, because he is receiving part of his compensation in terms of other (hard-to-observe) characteristics of the job, which may include lower effort requirements, more pleasant working conditions, better amenities etc.
• current labor market imperfections: two workers with the same human capital may be paid different wages because jobs differ in terms of their productivity and pay, and one of them ended up matching with the high productivity job, while the other has matched with the low productivity one.
• age discrimination: employers may pay a lower wage to a worker because of the worker’s age, and practically it is to much difficult looking for job positions after 40 age.
Consequently, in interpreting wage differences, and therefore in thinking of human capital reproduction and the incentives for investment, it is important for Armenia to strike the right balance between assigning earning differences to unobserved heterogeneity, compensating wage differentials and labor market imperfections, having consideration also harmonization of macro and micro economic impacts on human capital reproduction process. Human capital reproduction analyzing is verified, that still have misbalance between investments in macro in microeconomic levels, concerning to capital enlargement. According self survey results of human capital investing framework, has determinated difference factors impacts’ weights on human capital reproduction development. As a result, in Armenia more successful influence on human capital reproduction process coming from macro economy level, then from micro economy level, such us:
➢ public education – 20%
➢ cultural – 10% macro economic level (60%)
➢ social security – 15%
➢ public health – 15%
➢ professional education – 28%
➢ overqualification – 2% microeconomic level (34%)
➢ devoloping professional skills – 4%
➢ Armenian Diaspora – 2% outside environment influence (6%)
➢ re emmigrants -4%
In case for Armenia as a human capital development peculiarity also we can mention country outside environment influence, such us re immigrants overqualified skills implementation, Diaspora work force ability exchanging, is also considerable factor in human capital reproduction process (Hergnyan M., Makaryan A., 2006). However, comprehensive analyzing of human capital index by countries is coming to demonstrate, that currently Armenia is not competitive with Europe and such Central Asian countryside’s outline (see figure 2), which is making essential not only activating for regeneration and taking viable ranking positions, but also keeping accumulated national capital from migration risks.
Figure 2 Spread of scores (by pillar and overall)
Migration Motivations Survey Results in Armenia
There is closely linkage between human capital reproduction and migration processes (Martin, Philip L, 2004), which is making essential to emphasize migration motivations’ in Armenia. The main reasons behind the decision to migrate were connected with employment problems in Armenia, be it the lack of jobs in general, lack of jobs that pay sufficiently for a decent living, or the absence of profession-specific jobs. The majority of those aged 21-30, and 51 and above, decided to leave because they were unable to find a job in Armenia. This outcome might be explained by the fact that it is generally easier for the secondary-aged population to find a job. A
bigger demand for middle-aged people in the labour market is natural, since the young do not bring enough work experience, and the elders may not possess the skills required by the current market. The majority of residence with lower levels of education claimed they could not find jobs in Armenia at all. Other reasons include the absence of development perspectives in Armenia, obstacles to doing business, an undesirable moral and psychological atmosphere, and an unstable geopolitical situation.
Some other reasons may account too for the Armenian migration activity. Long term practice is coming to confirm us, that in some villages, from which many men have been continuously leaving to work abroad over a long period of time, labour migration has become a traditional way of providing for families even in former Soviet time, when we not have unemployment issues in Armenian labour market.
Another stimulus for labour migration, though not very widespread, was mentioned mainly by young men. They wish to leave their home village and live in a more cultural and socially vibrant environment (such as a town). They often try to settle in marz centers or Yerevan. There are many active people amongst them, who put their skills and abilities, in different fields, to the test, both in Yerevan and marz centers.
One more factor informing the decision to leave Armenia and work abroad is the need to make investments or to shoulder additional costs. For example, these would be the cost of educating children - hiring a tutor, covering the university fees or the need to support children who moved to another town within Armenia in order to further their education, wedding expenses, the purchase or renovation of a flat/house, start-up expenses for own business etc. It is interesting to know that every fourth migrant was planning to earn money to repair the family house, while every fifth aimed to pay for education of children, or procure durable products such as furniture, household appliances, and the like. These are heavy financial burdens at home and the income from work in Armenia is often enough only for basic everyday expenses, but insufficient to cover these additional expenses (Migration and Development Armenia Country Study, 2009).
Intentions to emigrate among house owners vary depending on these 3 types of residence and are slightly different among residents in villages and in Yerevan. Respondents in villages are around 2.5 larger than those in towns or Yerevan, reflecting the fact that in rural areas houses are dominant (Aleksandr Grigoryan, 2013). This, however, does not change the overall pattern that emigration intentions do not change much when moving from rural to urban areas. Around one third of respondents express willingness to emigrate, no matter where they reside, in rural or urban areas and whether families own house or not.
Consistent with our self study of motivation to migrate among Armenian residences, we are getting various results among potential emigrants and emigrated habitant (see figure 3). As a potential migrant has considered:
• anyone who is between 18-50 years old, lived in the country at the moment of the interview and was available for being interviewed.
• representatives of the young adult population (18–50 years), who are not actively seeking to migrate and are included.
As a emigrated residents is included:
• anyone who left the survey country aged 18 or over,
• lived and worked abroad continuously for at least three months,
• came back to own country within the last 5 years.
The survey is showing us, that in both potential emigrants and emigrated target groups the main migration reason is job seeking. Though, potential emigrants motivation is presenting more strongly in profession development, and long life education fields, making less attention to social condition development (see figure 3), which is considerable migration risk in human capital reproduction process in Armenia and need for further investigation and case – result analyzing not only in sociological, but also in economical framework.
Figure 3 Migration Motivations Survey Results in Armenia career
Emigrated Residents
Potential Emigrants
Migration Risks Influence on Human Capital Reproduction
All surveys and studies conclude that Armenian contemporary labor migration flows are, in most cases, of a temporary nature. It is estimated that 94 per cent of all migrants are temporary migrant workers, while only 3 per cent leave the country with the purpose of permanently settling abroad and 2 per cent leave in order to study abroad (Minasyan, A., Poghosyan, A., Gevorgyan, L., and Chobanyan, 2008). Regarding the education and professional background of migrant workers, household surveys converge to estimate that more than 70 percent of migrant workers either have secondary general education or secondary professional (vocational) education, while around 20 per cent have tertiary education. It is also noticeable that the migration rate of workers with higher education (7%) appears to be lower than that of workers with vocational and secondary education (11%). This may be explained by “the higher demand for [persons with tertiary education] in the domestic labour market”. (Migration and Development. Armenia Country Study, 2009). Given the high rate of unemployment within numerous skilled professional groups, this may only be a partial explanation. It could also be argued that the fact that a significant number of skilled workers appear to be employed abroad, under their level of qualification, may have a deterring effect on pull factors.
The most interesting and important thing that the parents having primary secondary and vocational education their children have lower probability to get higher education than the parents that have higher education. As a consequence, there is a linkage between parental and children's education level (Edgar Begrakyan, 2013). The linkage is more emphasized for higher education as it is likely to be connected with the financial conditions (as well as with ability) while an individual can get primary and secondary education in the public schools which are free of charge in Armenia.
Annually, about 60,000 labor migrants go to seek jobs in Russia, mainly in the construction industry. As a matter of rule, these migrants return to Armenia to visit their families at least once a year. Most of them do not wish to relocate families to Russia to settle there permanently. At the same time, they do not want to return to Armenia permanently, because they cannot find decent employment that would pay sufficiently to sustain their families. The resent surveys is showing, that however in case of finding employment, they would be ready to return to Armenia permanently (Migration and Development Armenia Country Study, 2009). Consequently, migration motivations is making sufficient influence on human capital reproduction process and have need for associated analyzing.
Furthermore, human capital is a link which enters both the cause and effects of economic-demographic changes and can not be developed in isolation. Rather, it is influenced by the interaction of complex demographic, social and economic factors. Obviously, well-managed labor migration has huge potential for governments, communities, migrants, employers and other stakeholders in countries of origin and destination. While job creation at home is the first, best option, an increasing number of countries see international labor migration as an integral part of national development and employment strategies by taking advantage of global employment opportunities and bringing in foreign exchange. In countries of origin, labour migration can relieve pressure on unemployment and can contribute to development through the channeling of remittances, transfer of know-how, and the creation of business and trade networks. In countries of destination which face labor shortages, orderly and well-managed labour migration can lighten labor scarcity, facilitate mobility, and add to human capital. Consequently, well founded migration management giving more advantages for both origin and destination countries and reducing inconvenience risks impacts on human capital reproduction process.
Unfortunately, in Armenia steel migration process is not under regular management, which is generating lot of local risks during human capital formation. Armenia is an important country of emigration, where most migrant workers leave to Russia in order to work on a temporary basis in the construction sector. Armenian workers in Russia face numerous abuses of their employment rights. And the same time Armenian current labor emigration policy is very limited and can not fully protect the economic and social rights of emigrants. It notably lacks a comprehensive approach that would include both activities in Armenia and in countries of destination (Alexandre Devillard, 2012).
Here, the issue of human capital reproduction is essentially transformed into another issue; i.e. explore, record, evaluate and effectively manage the migration risks. The matter is that the emigration of several people or groups, which is apparently derived from basic needs of households and which enhances their individual utility, upon reaching a certain threshold, begins to contradict to their social utility by thus, brings about the dispersion of aggregate human capital. This raises new social risks within the society and might become a problem for not only human capital accumulation but also for its simple reproduction (Marzpanyan H., Astvatsaturov S., Siroyan G.,2013).
Social isolation and intolerance, compulsive unemployment, lack of legal protection and material well-being and many other risks to which the main part of Armenian society is vulnerable, are mostly knitted into migration risks (the decision to migrate). While studying the social factors of migration or estimating the effectiveness of use of human capital, one should certainly take into consideration the impact of gender risks, which are clearly seen, for example, in the gender disbalance in employment sector and labor market. It will probably be sufficient to mention only one indicator from the great number of other proving this statement: in the employed population men and women are almost equally represented (women account for 46% and men for 54% of the employed), while in case of employers the proportion of men is quite significant (men-86%) .
Even though in service sector of RA women's educational level and professional expertise is much higher, most of these institutions are headed by men. This is clearly demonstrated particularly in health sector. Currently the total number of doctors in Armenia is 13200, 8850 of whom are women (66.5%). The implemented studies have shown that only 15 out of 100 medical institutions are headed by a woman. Taking into consideration the fact that lower-level positions (nurses, assistants, medical orderlies, etc.) are mainly held by women who are badly paid, it becomes obvious that gender-based differentiation of incomes in the health sector is unacceptably big and clearly expressed by vertical discrimination.
The picture is almost the same in state and local governance, manufacturing enterprise, service sector and financial-banking sector.
As a result, in the country overall a significant gender-based differentiation in terms of average monthly income has developed: during 2011-2012 women's average monthly wages continued to be about 63% of men’s wages . Among the employed population men's average salary was 131293 AMD, while women's average salary was 84992 , income of male employers was 23% higher than that of female employers, and income of self-employed men was more than double the income of self-employed women .
Anyway, gender disbalance in Armenian labor market, employment sector and income is a serious factor for migration risks growth. All the main factors that force population to migrate (poverty, unemployment, low income, distrust) are conditioned by gender discrimination in RA and its result-inefficient use of human capital.
Additionally, in Armenia effective procedures of generating and analyzing migration and human capital reproduction interrelations should be developed, including observant mechanisms and early-warning systems, with such elements as risk profiling and monitoring, to prevent not only administrative offences but also economic activities of individuals and organized groups. Despite the existence of several databases of relevance to irregular migration, representatives of the competent authorities stressed during the assessment that the databases they were regularly using did not comply with necessary requirements, lacking both in their technical characteristics and the quality of supporting equipment and software, such as, for instance, inability to collect, store and process biometric information, ageing computers and IT platforms, lack of interoperability between databases from different agencies (Enhancing Migration Data Collection, Processing and Sharing in the Republic of Armenia, Needs, Assessment and Gap Analysis Report, 2010) . This situation presents a considerable gap. Therefore, it is recommended to carry out a specialized thorough appraisal of the existing IT resources involved in the process of irregular migration counteraction, with a particular focus on the available hardware and software, interoperability between various databases, capacity to perform required functions (complex queries and quick results), to which extend the existing systems are utilized by relevant authorities (number of active users, functions for which the systems are used, users’ level of satisfaction and potential gaps – training level, legal framework).
According the “Skills and Employment for Migrants report, 2012”, the migration risks have an influence on human capital reproduction to following aspects:
• 36% of 18-50 age group in Armenia intend to migrate, but the likelihood decreases to 12.6% when controlled for actual ability to migrate,
• reasons for migration are all economic – lack of jobs, improving standards of living, unsatisfactory wage and career prospects at home – while reasons for return are typically family related
• pre-departure training: high interest from potential migrants (30-40%), but very little training received in reality (2% in Armenia),
• most migrants work as unskilled/skilled workers, irrespective of their education level; skills mismatch increases with education and is higher for women,
• post-return work: only 42% in Armenia work after return; high tendency to re-migrate again 68% in Armenia,
• remittances are used only to a small degree for education and business investments,
• reintegration programmes: awareness of return support and training schemes is very limited among returnees (and participation miniscule),
• portability of social rights improves the return outcome of returning migrants (The Skills Dimension of Migration: ETF Survay Rezults From Armenia and Georgia, 2012)
The issue of migration risks, being considered and analyzed through the prism of institutional risks, unites (bring together) the micro- and macro-levels of human capital reproduction. Moreover, migration process is making indispensable negative (sometimes positive) impact on human capital reproduction process, which his necessary to consider during workforces mobility regulation (see figure 4).
The self study results in human capital reproduction process framework is showing, that cur¬rent¬ly in Armenia 35% of human capital is in disbandment position because of unemployment or in use under less classified job position, and only 40% of human capital is effectively included in national economy system. The irritant matter is the 25% overall potential and current outflows human capital from country. The economic situation in Armenia steel assisting the emigration and consequently permanent human capital outflows. Only 5% returnees maintained, that implemented new professional skills and abilities, additionally occurred obtaining emigration. Consequently, migration risks is declining because of gaining new professional skills on abroad among re emigrants. However, the negative impact of migration on human capital reproduction process in Armenia is more, then constructive influence (see figure 4).
Conclusion
The human capital reproduction and migration processes having closely linkage. Although, currently in Armenia is actual to measure this correlation in order making qualitative analysis and conclusions, however there are some obstacles to do it. First of all, the human capital quantities assessment implementation practically has a gaps and non accountable points performance, which is issue not only in Armenia. This conditions making difficulties for analyzing of interrelations human capital reproduction and migration processing. Secondly, in Armenia the migration process is not under entirely regulation process and usually is taking monitoring from work forces mobility point of view, consequently having outstanding quality aspects of emigration results. Well managed labor migration has huge information providing potential for governments, communities, migrants, employers and other stakeholders in countries of origin and destination.
However, even in current situation it is possible to have some conclusions, concerning to impact of migration on human capital reproduction process in Armenia. More successful influence on human capital reproduction process in Armenia is performing from macro economy level, such us public education, cultural, social security. From micro economy level supplementary impact on human capital reproduction is making higher education, which is strongly related with migration risks. Talent scarcity in destination countries making reasonable manpower drain from Armenia, which is currently taking additional promotion in case of having higher education low fees and qualified workforce ineffective usage in Armenia.
Considerable unemployment rate among higher educated residence is bringing migration risks of transformation alumnus to abroad, because of paying less education fees in native country and having expensive paid jobs in destination countries. Thus, migration indirectly making identity corrections in human capital reproduction process, over reviewing traditionally installments of professions and skills of labor forces and configuring preventions against human capital disbandment process in Armenia. Consequently, migration and human capital reproduction interrelation analyzing results is performing the necessity of investment reorientation from high professional skills to the middle professionalism in accumulated human capital structure.
The constructive side of migration is reducing unemployment pressure and reevaluating of employability demands in Armenian labor market, which is giving macroeconomic optimizing corrections from human capital structural point of view. Currently, in Armenian tertiary education preparing some kinds of professions, which are mostly facing with spare of local labor market, and consequently is motivating emigration among them. Therefore, this kind of migration risks making some adjustments in process of human capital reproduction, reviewing the scope of traditionally prepared specializations in universities and colleges.
Finally, the labor migration can relieve pressure on unemployment, and this process can bring encouraging results by development through the channeling of remittances, transfer of know-how, and the creation of business and trade networks. However, in Armenia migration mentioned positive impacts are lower on human capital reproduction process, because most of all returnees had included in under qualified works in destination countries and do not taking usefully exchange abilities. Consequently, in order for reducing migration negative risks in process of reproduction human capital, is necessary to organize long life learning and over qualification trainings more dynamically among Armenian residence, which will promote demand and supplying balance keeping in job market and same time encourage effective investments in human capital formation process.
References:
Aleksandr Grigoryan, Who else migrates from Armenia? Evidence from intentions (2013), CRRC-Armenia Exploratory Research Fellowship Program
Armen Yeghiazaryan, Vahram Avanesian, and Nelson Shahnazaryan. How to reverse emigration? Technical report, jointly with ”Ameria” CJSC, 2003.
Bontis, N., Dragonetti, N. C., Jacobsen, K. & Roos, G. (1999). The Knowledge Toolbox: A Review of Tools Available to Measure and Manage Intangible Resources. European Management Journal, 17 (4), 391–402.
Enhancing Migration Data Collection, Processing and Sharing in the Republic of Armenia
Needs Assessment and Gap Analysis Report, December 2010, International Organization for Migration Mission in Armenia
Labour Migration in Armenia: Existing Trends and Policy Options, Alexandre Devillard
International Organization for Migration Yerevan, 2012, International Organization for Migration Mission in Armenia:
Minasyan, A., Poghosyan, A., Gevorgyan, L., and Chobanyan, H., Return Migration to Armenia in 2002-2008, AST OSCE, 2008, p. 9
Migration and Development. Armenia Country Study, ILO, 2009, pp. 23-42.
Schulz, T. W. (1981). Investing in People. The Economics of Population Quality. Berkeley:
University of California Press. 12+173 p.
Edgar Begrakyan, Inequality, Human Capital, Growth and Mobility in Armenia Economic Research Department, Central Bank of Armenia, May, 2013
Josef Koubek (2013), Some comments on the concept of human capital, its value and reproduction, Human Resources Management & Ergonomics, Volume, VII 2/2013 pp.78-89
Hergnyan M., Makaryan A., “The Role of the Diaspora in Generating Foreign Direct Investments in Armenia” ,Yerevan, 2006
Marzpanyan H., Astvatsaturov S., Siroyan G., Peculiarities of migration risks in Armenia in the light of human capital reproduction, 2013
Martin, Philip L (2004), Migration and development: Toward sustainable solutions, ILO Decent
Work Research Programme, DP 153/2004
Migration and Development Armenia Country Study, 2009, International Labour Organization
National Statistical Service, Armenia, 2013, //www.armstat.am
The Human Capital Report, 2013, World Economic Forum
The Skills Dimension of Migration: ETF Survay Rezults From Armenia and Georgia,
Skills and Employment for Migrants Yerevan, 2012
Valery Tishkov, Zhanna Zayinchkovskaya, and Galina Vitkovskaya. Migration in the countries
of the former soviet union. Technical report, Global Commision of Internatonal Migration, September 2005.
United Nations Development Programme, Migration and Human Development: Opportunities and Challenges. Armenia 2009, National Human Development Report 2009, Yerevan, 2010
Armen Gevorkovich Tshughuryan
Armenian State University of Economics
128, ул. Налбандяана, Ереван 0025, Республика Армения
Jarmen1@yandex.ru
Rishma Rajesh Vedd
California State University, Northridge CA
18111 Nordhoff Street, Northridge, CA 91330, USA
rishma.vedd@csun.edu
DEFFERD TAX ACCOUNTING: US-ARMENIA COMPERATIVE ANALYZING
Income tax requirements differ considerably from jurisdiction to jurisdiction. The application of the existing requirements to these different circumstances can be difficult, resulting in complex and potentially diverse interpretations. The Accounting Standards of the Republic of Armenia which have been adopted by the Ministry of Finance and Economy and are based on IAS (International Accounting Standards). The common approach for accounting for income tax shared by IAS 12 and SFAS 109 (US GAAP) is the temporary difference approach. However, the standards provides for exceptions to the temporary difference approach relating to the recognition and measurement of deferred tax assets and liabilities and the allocation of tax. The international accounting standards board constantly working on to remove any exceptions to the temporary differences resulting in simpler requirements based more on principle.
INTRODUCTION
In relation to international standards for presentation financial statements, when determining the object of taxation, accounting of the income and expenses shall be performed on the accrual basis. The taxpayer accounts income and expenses respectively from the moment of the acquisition of the right to receive such income or to recognize the expenses, irrespective of the actual period of deriving such income or making the payments. According to Profit Tax Law of the Republic of Armenia, when accounting income on the accrual basis, the taxpayer shall take into consideration, that the right to receive income is deemed acquired when the corresponding amount is subject to unconditional payment (compensation) to the taxpayer, or when the taxpayer has fulfilled the liabilities of the transaction or the contract, even if the moment of fulfillment of this right is deferred, or the payments are made in parts [1]. From another hand, consistent with international accounting stan¬dards revenue from the sale of goods should be recognized when all the following conditions have been satisfied:
(a) the enterprise has transferred to the buyer the significant risks and rewards of ownership of the goods;
(b) the enterprise retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold;
(c) the amount of revenue can be measured reliably;
(d) it is probable that the economic benefits associated with the transaction will flow to the enterprise; and
(e) the costs incurred or to be incurred in respect of the transaction can be measured reliably [2].
According to the tax law US companies are required to file tax return and when a company prepares its tax return for a particular year, the revenues and expenses (any gains/losses) included o the return are, by and large, the same as those reported on the company’s income statement for the same year. However, in some instances tax lows and financial accounting standards differ. The reason why differ is that the fundamental objectives of financial reporting and those of tax authorities are not the same. The differences in recognition for financial statements and for tax purposes are reconciled through deferred taxes.
Mentioned disparate revenue recognition approaches in tax and financial accounting fields making timing and temporary differences in tax expenses reporting. The income statement liability method focuses on timing differences, whereas the balance sheet liability method focuses on temporary differences. Timing differences are differences between taxable profit and accounting profit that originate in one period and reverse in one or more subsequent periods. Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.
RESULTS AND ANALYSIS
The objective of accounting for income tax in US companies is to recognize a deferred tax liability or deferred tax asset for the tax consequences of amounts that will become taxable or deductible in future years as a result of transaction or events that already have occurred. The current US GAAP focuses on the balance sheet and the recognition of liabilities and assets. Conceptually, though, the balance sheet approach strives to establish deferred tax assets and liabilities that meet the definitions of assets and liabilities provided by the Financial Accounting Standards Board’s conceptual framework. The accounting for income taxes in iGAAP is covered in IAS 12 (“Income Taxes”). Similar to U.S. GAAP, iGAAP uses the asset and liability approach for recording deferred taxes. The differences between iGAAP and U.S. GAAP involve a few exceptions to the asset-liability approach; some minor differences in the recognition, measurement, and disclosure criteria; and differences in implementation guidance.
Accomplishment of current tax assets and liabilities recognition in Armenian companies bases on following principles. Current tax for current and prior periods should, to the extent unpaid, be recognized as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess should be recognized as an asset. When a tax loss is used to recover current tax of a previous period, an enterprise recognizes the benefit as an asset in the period in which the tax loss occurs because it is probable that the benefit will flow to the enterprise and the benefit can be reliably measured. A deferred tax liability is recognizing for all taxable temporary differences. When the carrying amount of the asset exceeds its tax base, the amount of taxable economic benefits will exceed the amount that will be allowed as a deduction for tax purposes. This difference is a taxable temporary difference and the obligation to pay the resulting income taxes in future periods is a deferred tax liability. As the enterprise recovers the carrying amount of the asset, the taxable temporary difference will reverse and the enterprise will have taxable profit. This makes it probable that economic benefits will flow from the enterprise in the form of tax payments.
Consequently, current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period. Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.
Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Temporary differences may be either:
• taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled; or
• deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.
Tax assets and tax liabilities in Armenian enterprises presented separately from other assets and liabilities in the balance sheet. Hence, deferred tax assets and liabilities is distinguished from current tax assets and liabilities. When an enterprise makes a distinction between current and non-current assets and liabilities in its financial statements, it is not classifying deferred tax assets (liabilities) as current assets (liabilities).
Recognizes differed tax liabilities gradually declining in future, in financial statements Armenian enterprises bringing tax expenses, differed tax actives, is making deductible expenses in future taxation process. When in financing and tax accounting incomes and expenses is been timing congruent, its not making differed tax actives and liabilities’.
t0 t1
REPORTING PERIOD
Income (IF) and expenses (EF) of
Financial Accounting
.
Income (IT) and expenses (ET) of
Tax Accounting
Figure 1 Timing harmonious incomes and expenses in Financial and Tax Accounting
framework
In Armenian enterprises accounting practice the differed tax liabilities taking place in cases, when:
- recognized income in financial accounting > recognized income in tax
accounting
IF >IT (figure 2)
- recognized expenses in financial accounting < recognized expenses in tax
accounting
EF < ET (figure 3)
In practice activity Armenian enterprises differed tax assets generally is occurred in two cases, when:
- recognized income in financial accounting > recognized income in tax
accounting
IF < IT (figure 4)
- recognized expenses in financial accounting > recognized expenses in tax
accounting
EF > ET (figure 5)
t0 t1
REPORTING PERIOD (IF >IT)
Incomes recognized by
Financial Accounting
POST REPORTING PERIOD
.
Differed Tax Incomes recognized by
Liabilities Tax Accounting
Figure 2 The timing process of presentation Differed Tax Liabilities in Financial
Statement (when IF >IT)
t0 t1
REPORTING PERIOD (EF < ET)
Expenses recognized by
Differed Tax Financial Accounting
Liabilities
POST REPORTING PERIOD
.
Expenses recognized by
Tax Accounting
Figure 3 The timing process of presentation Differed Tax Liabilities in Financial
Statement (when EF < ET)
REPORTING PERIOD (IF < IT)
Incomes recognized by
Differed Tax Financial Accounting
Assets
POST REPORTING PERIOD
.
Incomes recognized by
Tax Accounting
Figure 4 The timing process of presentation Differed Tax Assets in Financial
Statement (when IF < IT)
t0 t1
REPORTING PERIOD (EF >ET)
Incomes recognized by
Financial Accounting
POST REPORTING PERIOD
.
Differed Tax Expenses recognized by
Assets Tax Accounting
Figure 5 The timing process of presentation Differed Tax Assets in Financial
Statement (when EF >ET)
The more situations for differed tax assets formation in practice is related to depreciation accounting process, when Armenian Law of Profit Tax suggested only straight-line method, but simultaneously IAS 16 “Property, Plant and Equipment” offers variety of depreciation methods an asset on a systematic basis over its useful life. These methods besides of straight-line method include also diminishing balance method and the units of production method. Straight-line depreciation results in a constant charge over the useful life if the asset's residual value does not change. The diminishing balance method results in a decreasing charge over the useful life [3]. Consequently, using accelerating depreciating method is bringing temporary differences in tax expenses recognition and as a result in balance shit is presented as a differed tax assets.
For example, is purchased fixed assets by $ 3000, with 5 year useful life exploitation and $1000 per year returns. The profit tax percentage for all period of fixed asset operation is 20%. Consequently, by the and of assets exploitation period (5-th year) the enterprise will be have revenue $5000, proceeds profit $2000 and accordingly will get hold of tax obligation $400.
By the requirements of Armenian Profit Tax Law, based on Straight – Line method value of depreciation for all years of assets exploitation will be:
$3000 : 5 years = $600
According to enterprise accounting policy, accelerating approach of amortization will present depreciation value by each years of assets exploitation period such us:
1 + 2 + 3 + 4 + 5 = 15
I year 5/15 x 3000 = 1000
II year 4/15 x 3000 = 800
III year 3/15 x 3000 = 600
IV year 2/15 x 3000 = 400
V year 1/15 x 3000 = 200
In this case Tax Accounting will be recognize profit tax expenses as $80 constant value for all period asset operation (see table 1), but from another hand, in financial accounting tax expenses will be present by differed time attitude (see table 2), in consequence making differed tax assets.
Table 1
Profit Tax Formation in case of using Straight Line Depreciation method [4]
Items Years
1 2 3 4 5 Total
Revenue 1 000 1 000 1 000 1 000 1 000 5 000
Expenses 600 600 600 600 600 3 000
Profit before tax 400 400 400 400 400 2 000
Profit Tax 80 80 80 80 80 400
Net Profit 320 320 320 320 320 1 600
Table 2
Profit Tax Formation in case of using Accelerating Depreciation
Items Years
1 2 3 4 5 Total
Revenue 1 000 1 000 1 000 1 000 1 000 5 000
Expenses 1 000 800 600 400 200 3 000
Profit before tax 0 200 400 600 800 2 000
Profit Tax 0 40 80 120 160 400
Net Profit 0 160 320 480 640 1 600
In Armenian companies arrangement of differed tax assets is presented by financial accounting according following transactions:
First year
Recognition of tax paying responsibility
Dt Current tax Expanses………..80
Kt Profit Tax Liabilities……………………80
Recognition of differed tax assets
Dt Differed Tax Assets………………..80
Kt Differed Tax Expenses…………………80
Profit Tax Expense presentation in Financial Statement =
Current tax Expanses + Differed Tax Expenses = 80 - 80 = 0
Second year
Recognition of tax paying responsibility
Dt Current tax Expanses………..80
Kt Profit Tax Liabilities……………………80
Recognition of differed tax assets
Dt Differed Tax Assets………………..40
Kt Differed Tax Expenses…………………40
Profit Tax Expense presentation in Financial Statement =
Current tax Expenses + Differed Tax Expenses = 80 - 40 = 40
Third year
Recognition of tax paying responsibility
Dt Current tax Expanses………..80
Kt Profit Tax Liabilities……………………80
Recognition of differed tax assets
Dt Differed Tax Assets………………..0
Kt Differed Tax Expenses…………………0
Profit Tax Expense presentation in Financial Statement =
Current tax Expenses + Differed Tax Expenses = 80 - 0 = 80
Fourth year
Recognition of tax paying responsibility
Dt Current tax Expanses………..80
Kt Profit Tax Liabilities……………………80
Declining of differed tax assets
Dt Differed Tax Expenses…………………40
Kt Differed Tax Assets………………..40
Profit Tax Expense presentation in Financial Statement =
Current tax Expenses + Differed Tax Expenses = 80 + 40 = 120
Fifth year
Recognition of tax paying responsibility
Dt Current tax Expanses………..80
Kt Profit Tax Liabilities……………………80
Declining of differed tax assets
Dt Differed Tax Expenses…………………80
Kt Differed Tax Assets………………..80
Profit Tax Expense presentation in Financial Statement =
Current tax Expanses + Differed Tax Expenses = 80 + 80 = 160
Expenses recognized Revenues recognized
by Financial Accounting by Financial Accounting
Profit presentation
In Financial Statements’
Differed Tax
Adjustments
+ , -
Profit Recognition
through Tax Accounting
Figure 6 The mechanism of profit configuration
Accordingly, in Armenian companies in order for transforming from financial accounting into tax accounting profit in use adjustments processing, related to recognition and downgrading differed tax assets and liabilities (see figure 6).
CONCLUSION
Incidentally, IAS 12 describes recognition and measurement of deferred taxes using a temporary difference approach, similar to the method of FAS 109, Accounting for Income Taxes. Although there are significant differences in the treatment of tax basis, uncertain tax positions and recognition of deferred tax assets and liabilities, FASB and IASB working on the issue of differences. The IASB (International Accounting Standards Board) issued an Exposure Draft of an IFRS to replace IAS 12 Income Taxes with the intention of eliminating many of the differences between the IFRS and FASB standards.
Tax Accounting US-RA Comparative Interpretation making conclusion, that there are several differences between IFRS and GAAP relating to accounting for and reporting of income taxes:
Firstly, the tax rate used for measuring deferred taxes under GAAP is the enacted tax rate in place when the timing difference is expected to reverse, whereas under IFRS, the substantially enacted tax rate is used.
Secondly, under GAAP, the classification of the deferred tax asset or liability is either short-term or long-term depending on the underlying relationship of the timing difference. Under IFRS, deferred tax assets and liabilities are always recorded as long-term.
Thirdly, under GAAP (for non-public companies), a reconciliation of the expected tax expense to actual is not required in detail and only a disclosure of the nature of the reconciling items is required. IFRS requires the complete reconciliation, including the nature and amounts.
Literature:
1. The Law of Republic of Armenia on Profit Tax, 1997, item 43
2. International Accounting Standard 18 “Revenue”, item18, (revised 2003)
3. International Accounting Standard 16 “Property, Plant and Equipment”, item 62 (revised 2005)
4. S.Eloyan, Estimation of Tax Assets in Tobacco Production, Bulletin of State
Agrarian University of Armenia, #2, 2009, pages 110-111
5. “Income Taxes”, International Accounting Standard No. 12 (IASCF), as mended
effective January 1, 2009. item 11
6. FASB ASC 740-10-35: Income Taxes-Overall-Subsequent Measurement “Accounting for Income Taxes, Statement of Financial Accounting standards No. 109.
2005, item 3
Армен Геворкович Джугурян, Ришма Раджесовна Веед
СРАВНИТЕЛЬНАЯ ТАРКТОВКА НАЛОГОВОГО УЧЕТА США И РА
Приводится практика учета налога на прибыл в организациях Республики Армении и США и на этой основе предлагаются пути гармонизации подходов финансового учета с принципами международными стандартами финансовой отчетности (МСФО). В частности, предлагается механизм учета отложенных налоговых активов, формируемые при лизинговых сделках. Раскрываются пути расширения аналитичности представления информации по отложенным налогам, и наряду с представлением отложенных налоговых активов по отдельным бухгалтерским счетам, предстовлаются информационные потоки, форми¬рующиеся от наличия налого¬облагаемых временных разниц.
Обосновывается необходимость увязки информационных потоков по налогам на прибыль в рамках финансового и налогового учета, что создает условия для информационного обеспечения координации требований действующего налогового законодательства и МСФО. Сделанные в предложения удовлетворяют требования МСФО по части отдельного раскрытия информации основных компонентов расходов по налогу, таких как текущие расходы по налогу (возмещение налога), суммы отложенных расходов по налогу, связанные с образованием и восстановлением временных разниц и изменениями в налоговых ставках.
REGIONAL ECONOMY DEVELOPMENT ISSUES IN ARMENIA
Juguryan Armen Gevorky,Doctor of Science, professor at the Armenian Northern University, Jarmen1@yandex.ru
The latest world financial economic crises impact to Armenian economy development and as a result, after several years of double-digit economic growth, Armenia faced a severe economic recession with GDP declining more than 14% in 2009, despite large loans from multilateral institutions. The economy began to recover in 2010 with 2.1% growth, and picked up to 4.6% growth in 2011, before slowing to 3.8% in 2012. Sharp declines in the construction sector and workers' remittances, particularly from Russia, led the downturn economy particularly in Armenian regions. During the Soviet central planning system, in Armenian regions is developed a modern industrial sector, supplying machine tools, textiles, and other manufactured goods to former Soviet Union republics and consequently more of them at that time is presented as a agro-industrial. Previous inter industrial connection is pulling down and accordingly, majority is Armenian regions currently recognized as a rural activity specialized.
While decentralization has been one of the most significant parts of the transition reforms, its consequences for some of the countries in the post-soviet territory remain incompletely understood. In an overview of the general picture of the choices of local development program options Armenian communities, for the independent period economy enlargement issues is observed with only small share of priorities directly focused towards local business development. Thus the prioritization of local development activities in Armenia is largely unreflective of the “excellence” principle of having a “holistic approach including social, environmental as well as economic issues” in local development strategies.
Successful private enterprises create wealth, jobs and improved living standards in local communities but depend on favorable local conditions to achieve prosperity. Considering widely argued claims on the expediency of the promotion of businesses at local levels more emphasis would be needed on the side of authorities to the consideration of benefits, that might stem from promoting opportunities for development of businesses at local levels in Armenia.
While the current law on local self-governance foresees a role for local governments in business development, the statement of concrete obligations and tools towards their real involvement are far from being clear. Revisions of the relevant parts of the legislation would be needed in order to direct and facilitate the local governments’ real involvement in local business development. In addition, absence of prior practice of how to actually “do” local business development could be a reason of having very few communities choosing to get involved in developing businesses. While having a supportive and friendly legislation could largely contribute to guiding and empowering the communities for proceeding with developing businesses in their communities, there are still a number of things that the communities could do even without having the supportive legal institutions.
The regional economy recent years monitoring coming to substantiate, that is occur slow development trend in various marses Armenia, even though evidently with non harmonization expansion between regions (see table 1).
Table 1
EXPENDITURES ON PRODUCTION OF PRODUCTS, GOODS, SERVICES AND REALIZATION OF COMMERCIAL ORGANIZATIONS (mln. darms)
REPUBLIC OF
ARMENIA 2008 2009 2010 2011 2012
YEREVAN CITY 1 214 312.0 1 366 669.3 1 563 052.2 1 602 805.2 1 786 781.6
ARAGATSOTN 966 836.2 1 101 347.0 1 181 990.4 1 135 814.8 1 221 191.4
ARARAT 7 187.5 9 297.5 12 323.4 17 165.8 18 522.8
ARMAVIR 24 894.4 29 591.3 32 716.0 39 834.3 50 468.4
GEGHARKUNIK 3 852.0 5 273.5 5 142.2 6 242.0 28 613.5
LORI 10 038.2 13 881.9 55 378.1 73 668.1 78 491.8
KOTAYK 67 292.1 67 067.9 81 795.7 100 778.1 112 454.7
SHIRAK 10 171.8 15 090.9 12 350.2 18 033.0 21 003.9
SYUNIK 74 771.5 68 991.2 111 710.6 128 199.2 132 706.9
VAYOTS DZOR 3 109.2 6 713.3 7 304.6 7 293.0 13 041.7
TAVUSH 3 976.5 3 580.0 7 104.9 6 145.6 7 062.6
The weak financial positions and incentives are certainly one of the major factors limiting local governments’ activities in local business development. Consolidation of communities and establishment of intercommunity-unions to overcome the ineffective operation of numerous small local governments has been suggested before and is worth to be taken into consideration. Collaboration among municipalities faced with the same barriers could result in a strengthened position to address some of their common issues. In particular, a larger diversification of financing sources for development programs might be feasible under collaboration.
In addition, better administration and collection of local taxes and duties within the current legislative framework has been predicted to have the potential of leading to significant increase in local governments’ revenues. In this context, full administration of own tax collection functions by local governments has been recommended .
The regions of Armenia are facing the challenge of maintaining high economic growth which has been achieved today primarily due to private transfers. This does not create sustainable competitive advantages for the Armenian economy and will not secure Armenia’s long-term economic growth.
According to international Local and Regional Economic Development experience approach, has become more holistic mostly involves:
• value chain-, cluster- and business development service elements,
• a strong demand-, implementation- and market orientation as important intervention criteria
• a multi-level intervention approach linking network interventions at the business (or micro), institutional level (meso) and the policy level (macro)
• a bottom-up and a top-down approach,
• the promotion of concrete initiatives that create a joint learning and trust-creation process between public and private representatives (see fugure 1).
Businesses do not organize themselves according to bureaucratic regional borders but according to markets, supplier- and buyer relations. This is the reason why is not principally a public sector task but rather a network governance requirement integrating motivated private and public sector representatives with their different roles. This is especially important in former socialistic systems where central planning and institutional roles were very hierarchical and market governance structures were very weak. An important learning is that every economic development strategy, whether it is called cluster, value chain or business linkage, requires the strong involvement of the private sector
as the main target group rather than public sector-driven approaches. Nonetheless, business promotion requires clear but distinctive responsibilities on the part of the stakeholders, such as:
the coordination and strategic role of the public sector as well as its role in reducing bureaucratic
obstacles for firms,
the market-oriented and competitiveness-seeking role of businesses who look for suppliers and
buyers and opportunities in the market, and who organize themselves into associations or business
networks,
the strong role of supporting organizations like e.g. associations, technology-, financial- and training
institutions and consultancy agencies to match their supply of services with the real demand of businesses.
Top-down policy incentives and strategies
Macro Business Clusters and
Services business linkages
Intervention Supporting Network Market
levels tools orientation
Supporting Supportin Value chain Value g
Micro Factors relations
Local bottom-up promotion
Figure 1 Local economic development holistic approach
Therefore, new approaches for the country's development are required. There are three key spheres that require active institutional policy.
- Formation of a globally competitive business environment. Developed companies are only interested in the countries where total expenses of conducting business are lower than in comparator countries or where there are unique opportunities of creating new values. Most of these opportunities are conditioned by the business environment of a given country; this is why persistent improvement of the business environment is so important.
- Creation of new sources of growth. Even with the presence of a really favorable business environment, business expansion will require special resources and competences in certain sectors. For Armenia, with its limited natural resources, this may be compensated by technological, managerial and creative competences in the sectors where the rapid accumulation of these competences is achievable.
- Attracting the Diaspora resources. The third key element for Armenia with its large and globally integrated Diaspora, is the active attraction of Diaspora resources for breaking the information and reputation vacuum around the country; creating additional incentives for multinational companies (including those with Diaspora capital) for choosing Armenia as an investment destination; as well as extensive expansion of the resource base for economic growth.
Sources for a new growth in Armenia can be created through offering resources and competences in certain sectors which may be integrated into global value chains of international companies. In the case of Armenia, the desired elements of global value chains may be research and development, product testing, production of technological components requiring disciplined workforce of medium and high qualification, strong creative skills as well as specific managerial resources capable of integrating into international companies and securing the expansion of their businesses in Armenia. These competences and resources must reach a critical mass in a certain sector in order to attract the attention of transnational companies, and therefore, they may be created and modernized through focused investments.
Such investments may be directed to special education (connected with certain sectors) and creation of training and educational centers, specialized laboratories, obtaining of technologies and their adjustment, hiring highly-qualified (in some cases globally-recognized) foreign specialists as well as creating experienced producers. The key function of the government must be the role of a catalyst and coordinator of the process. However, coordination and active involvement of the business sector, educational institutions, professional associations and interested representatives of Diaspora is the precondition of a real success. The scale and novelty of these efforts require active attraction of foreign sources of competence and capital, in particular those of Diaspora, and not only. At the initial stage, they themselves can become autonomous sources for economic growth and, as a consequence, they will stimulate growth supported by private investments. At the same time, these efforts will be productive only with a distinct focus on certain sectors (in some cases - even on certain transnational corporations); otherwise they may be not demanded by the market.
Finally, the objective of those initiatives will be the creation of strong and effective clusters (geographically close, interconnected groups of companies and supporting institutions). The very presence of clusters, and not separate companies, makes the given industry attractive for transnational companies. On the other hand, the entrance of a large transnational company may stimulate the entrance of others and the development of the entire cluster. Taking this into account, in some cases it will be reasonable to create special infrastructures for certain large transnational corporations. Special strategies are necessary for companies seeking geographic diversification of development and production and striving for a region in the CIS and the Near East. For attracting such important players, the government may act as a co-investor providing land, buildings, infrastructures, and in special cases also tax privileges.
Figure 2 Suggested mecanizm for production prise stabilazation in Armenian regions
The strategy for institutionalizing learning and innovation, according to the GIZ Municipal and Economic Development Program in Armenia followed several aspects:
➢ skills development on innovative LRED methods: The GIZ Programme provides trainings and field practice on new methods and tools to promote an innovative means to analyze opportunities that strengthen local competitive advantages. In this context, a team of professional consultants were trained and new services developed (micro-finance fund, micro franchising system).
➢ organizational innovations: through the promotion of concrete economic initiatives new learning networks are initiated. They are oriented towards concrete economic improvements, entrepreneurship thinking: the GIZ trains service providers as well as start-up businesses directly in the use of entrepreneurship courses to realize new innovative business opportunities,
➢ innovation through matching: many Local and Regional Economic Development initiatives are oriented towards better harmonization the existing supply of services with the demands of businesses. The resulting new orientation can be interpreted as new innovative services.
➢ encouraging new market and value chain linkages like e.g. of food processors to new buyers in Yerevan supermarkets or the opening of selling-shops in local markets demonstrate new innovative ideas in the respective context,
➢ product innovations: the development of new local economic products like e.g. hiking zones (in Noyemberyan), agro tourism tours or even fruit processing initiatives (in Vayk) has contributed to new learnings on market demands
➢ process innovations: the alignment of the local stakeholders towards developing a common objective and common implementation procedures results in a new format of organization and process orientation that is very different to former hierarchical structures.
From our point of view, the main issue of current regional development program is production market prices settlement, which is to low for production expenses recovering. Hence, it is reasonable suggestions, concerning to price subsidiary mechanizm for production in Armenian regions (see figure 2). For this purposes, the goverment might take responsibiliaty to purchase by contractual prices 30% made production in regions, and the other 20% of product prices will be subsidiaries in case of market price decline. The rest 50% product made in regions, will be go through market pricing process, without supporting factors. In that case, will be work to directions for regional economic development holistic approach. That is, from one hand, coming in use top-down policy incentives and strategies from macro economy level, and from another hand, the free market relations tools will in applying and improvement process in slightly economy leveled marzes in Armenia.
Annotation
In Armenia, economic value-added opportunities, especially in regional areas, are still underdeveloped. During independent period, the country lost almost 30% of its inhabitants due to emigration. Revenues
from remittances have become the basic financial income flows for householders’, particularly from region areas. In article is presented the regional economy development ways with corroborate mix supporting factors, as a top-down policy incentives and local bottom-up promotions.
Key words: region economy development, top-down policy incentives and strategies, local bottom-up
promotion, price subsidiary, value added chain relations.
ՏՆՏԵՍՈՒԹՅԱՆ ԶԱՐԳԱՑՄԱՆ ՀԻՄՆԱԽՆԴԻՐՆԵՐԸ ՀԱՅԱՍՏԱՆԻ ՄԱՐԶԵՐՈՒՄ
Ճուղուրյան Արմեն Գևորգի, տնտեսագիտության դոկտոր,
«Հյուսիսային համալսարանի » պրոֆ.
Հիմնաբառեր. տնտեսության տարածաշրջանային զարգացում, “ուղղահայաց” խրախուսման ռազմավարություն, “ներքևից” լոկալ աջակցություն, գների սուբսիդավորում, արժեավելացման շղթայական հարաբերու¬թյուններ:
Տնտեսական աճի հնարավորությունները Հայաստանի մարզերում դեռև լիարժեք չեն իրացվում և զարգացման կարիք ունեն: Անկախացման տարիներին, ազգաբնակչության շուրջ 30%-ը ար-տա¬գաղթեց և հատկապես մարզային տնային տնտեսությունների հիմնական ֆինանսական ներհոսքերի աղբյուր հանդիսացան արտերկրում ձևավորված եկամուտներից փոխանցումները: Հոդվածում քննարկվում են տարածաշրջանային տնտեսության զարգացման ուղիներ, շեշտադրում կատարելով աջակցման այնպիսի համակցված գործոններին, ինչպիսին են «վերեևից–ներքև» խթանիչ տնտեսական գործիքները, ինչպես նաև տե¬ղական աջակցող ռեսուրսների ներգրավումը:
ПРОБЛЕМЫ РАЗВИТИЯ ЭКОНОМИКИ В РЕГИОНАХ АРМЕНИИ
Джугурян Армен Геворкович, доктор экономических наук,
проф. Северного университета
Ключевые слова: региональное развитие экономики, стратегия перпендикулярной мотивации, локальная поддержка “снизу вверх”, субсидирования цен, цепочка взаимосвязей формирования добавочной стоимости .
Возможности экономического развития в марзах Армении до сих пор нуждаются в полной реализации и совершенствовании. В период независимости, почти 30% населения Армении эмигрировало и следовательно, часть своих доходов в виде трансфертов перенаправило в частности в региональные домашние хозяйства. В статье трактуются пути развития экономики в марзах Армении, особое внимание уделяя применению комбинированного подхода факторов поддержки, таких как использование инструментов мотивации “сверху вниз”, а также привлечения локальных ресурсов развития.
PRO-CYCLICALITY IN THE BASEL III FRAMEWORK
Juguryan G. ArmenProfessor, doctor of science, “MFB” Financial Academy
Jarmen1@yandex.ru, (095) 09-71-70
Khachatrayan N. Nonna
Assosiate prof., Phd, Yerevan State University
Nonka-J@yandex.ru
Generally business cycle consisting of four periods representing different points in a typical cycle: trend, trough, peak, and back to trend. Each point in the business cycle is characterized by a different probability of default on securities and loans. To construct the normal business cycle, the defaults on loans and debt securities were assumed to change with the pulse of the cycle, increasing during economic downturns and decreasing during upswings. However, the world financial economic last crises is came to prove us, that business crediting process in Armenia still not have pro-cycling reflections. Actually, even in crises period, when the gross domestic product in country stridently come down, the indicator of crediting/GDP is presented up growth predisposition, because of increasing loan intervention in economy from Armenian commercial banks (see figure 1).
Figure 1 The tendency of crediting /GDP proportion in RA
For international banks a key improvement in the Basel II framework is enhancing risk sensitivity assessment in pro - cyclicality process. Yet this very feature is associated with the unintended effect of heightening its pro-cyclical propensity. Basel II recognizes possible business cycle effects and how they should be addressed in both Pillar 1 (minimum capital requirements) and Pillar 2 (supervisory review process) of the framework. If Basel II is properly implemented, then greater risk sensitivity can lead bank restore capital earlier in a cyclical downturn, thus preventing a build-up of required capital when it could amplify the cycle. Under Basel II’s Standardized Approach, risk weights are based on external ratings constructed to see through the cycle, so that cyclical effects are muted. It is in the internal ratings-based (IRB) approaches that deterioration in credit risk feeds more directly into the capital requirements. The three main risk components in the IRB approaches (e.g., probability of default, loss given default, and exposure at default) are themselves in by cyclical movements and may give rise to a cyclical impact on banks’ capital requirements.
Basel II includes mitigating measures to address these concerns. Although Pillar 1 does not mandate the use of through-the-cycle models, it promotes estimates of risk components base on observations that “ideally cover at least one economic cycle,” and whose validation must be based on data histories covering one or more complete business cycles.
However, pro - cyclicality prudential tools in Basel II framework is not work efficiently in world financial economy last crisis period. Consequently, Basel III sets out two key buffer measures to address pro-cyclicality a capital conservation buffer and a countercyclical capital buffer: The Committee is introducing a capital conservation buffer framework requiring banks to build up a buffer of CET1 capital in excess of the minimum CET ratio. The buffer requirement is aimed at preventing a re-occurrence of the recent financial crisis where a number of banks continued to make large distributions in the form of dividends, share buy backs and large compensation payments even though their financial condition was worsening. The framework reduces the discretion of banks which do not hold sufficient capital in excess of the regulatory minimum, to distribute earnings. The idea is that retaining a greater proportion of earnings during an upturn to build up a buffer will help ensure that capital remains available to support business operations during times of stress and therefore reduces pro-cyclicality.
According to principles of Basel III, banks must maintain a capital conservation buffer of 2.5% of risk weighted assets, over the regulatory minimum capital requirements. The buffer is capable of being drawn down, but supervisors must be involved to ensure that the capital plans of the bank include rebuilding the buffers over an appropriate timeframe. Capital distribution constraints are imposed on a bank when its capital position falls within the conservation range. The constraints only relate to distributions, not the operation of the bank. Distributions are defined as dividends and share buybacks, discretionary bonus payments to staff and discretionary payments on other Tier 1 capital (see table 1).
Table 1
Limitation of Profit Distribution in Banks Capital
buffer required percentage achievement process
Buffer pproportion in capital % Restrictions of profit distribution %
< 0,625 100
0,625-1,25 80
1.25-1.875 60
1,875-2,5 40
> 2,5 0
However, the distribution constraints are greater as a bank’s capital buffer range falls further towards the minimum capital requirement. At the top of the range, the constraints are minimal. This was a deliberate design of the Basel Committee, on the basis that at certain times, a bank’s capital levels may fall within the buffer range and should not be penalized strictly, expressed as a percentage of earnings that a bank must meet at various levels of CET1 capital ratios. For example, if the bank maintains a CET1 ratio of between 5.75% and 6.375% it is required to conserve 60% of its earnings (i.e. payment of not more than 40% in terms of dividends, share buy backs and discretionary bonus payments). If the bank wants to make payments in excess of the distribution constraints, it would have the option of raising capital in the private sector equal to the amount above the constraint.
The conservation buffer will be phased in between 1 January 2016 and year end 2018, becoming fully effective on 1 January 2019. It will begin at 0.625% of RWAs on 1 January 2016, increase each subsequent year by 0.625% to reach its final level of 2.5% of RWAs on 1 January 2019. National authorities have the discretion to impose shorter transition periods. As of 1 January 2019, the capital buffer of 2.5% and the minimum CET1 ratio of 4.5% will be in effect, meaning that the minimum CET1 capital requirement (excluding the counter-cyclical capital buffer) will be 7%.
The recent financial crisis illustrated that losses incurred in the banking sector can be extremely substantial when a downturn is preceded by a period of excess credit growth, and that those losses can transmit into the real economy and back again. The countercyclical buffer requirement is aimed at ensuring that the banking sector builds up its capital defenses in periods when credit has grown to excessive levels. The buffer should not just protect the banking sector in periods of excess credit growth, but also help moderate excess credit growth.
According to Basell III framework, the buffer will vary between 0 and 2.5% of RWA. The principles that the National Authorities must follow are set out in the Basel Committee document published on 16 December 2010, “Guidance for national authorities operating the counter-cyclical buffer”.
To give banks time to adjust to a buffer level, a jurisdiction will pre-announce by up to 12 months its decision to raise the level of the buffer. The buffer requirement only applies to private sector (which includes non-bank financial sector) credit exposures. The framework contains international reciprocity provisions for banks which operate in more than one jurisdiction (i.e. internationally active banks). The host authority will set a buffer requirement that it can apply to credit exposures held by legal entities (i.e. domestic banks) located in its jurisdiction. It will notify other Basel country authorities. Each Basel country authority has agreed to be responsible for ensuring that the banks they supervise impose a buffer requirement on exposures held in the host jurisdiction which has imposed the counter-cyclical buffer. Jurisdictions may choose to implement larger countercyclical buffer requirements. In such cases, the reciprocity provisions of the regime will not apply to the additional amounts. The home authorities can require banks they supervise to maintain higher buffers if they judge the host authorities’ buffer to be insufficient. The reciprocity arrangements ensure there is a level playing field between domestic banks and foreign banks lending to counterparties in a particular jurisdiction.
The countercyclical buffer requirement is implemented through an extension of the capital conservation buffer. This means that the countercyclical buffer requirement is added on to the conservation range and the minimum conservation ratios are applied to the Common Equity Tier 1 ratio calculated by adding the minimum CET1 ratio of 4.5% with the two buffer ratios of 2.5% and 2% (maximum of 9.0% CET1 ratio). Restrictions on distributions described above in the capital conservation section, apply equally. As with the conservation buffer, the countercyclical framework will be applied at the consolidated level, but national supervisors can apply it on a solo level.
The committee has clarified that it is still reviewing the question of permitting other fully loss absorbency capital beyond CET1 and what form it could take. Until the Committee has issued further guidance, the buffer is to be met with CET1 only.
The countercyclical buffer regime will be phased in parallel with the capital conservation buffer between 1 January 2016 and year 2019. Countries that experience excessive credit growth during the transition period can consider accelerating the build up of the capital conservation buffer and the countercyclical buffer.
Accordingly, from point of macro - economy prudence view, we are suggested the process of implementation banking activity normative indicators in following ways:
First of all, set up normative indicators, which will support to growing up banking expenses in crediting spreading out period and consequently from one hand, establish conditions for capital buffer formation, and from another hand, making banking service more expensive, and as a result, preventive loan over allocation.
Secondly, implemented inter banking normative framework, which will make some profit confines distribution in crediting peak period, saved bonuses, additional benefits and dividends, and after resend it to the buffer provision in order to covering potential pro - cyclicality losses.
Thirdly, in order to prevention economy downturn and banking activity risks, supplementary to Basel Comity requirements, is designate local normative tools in tax delaying, governmental warrants presenting framework, during crediting process in banking system of RA.
PRO-CYCLICALITY ISSUES IN THE BASEL III FRAMEWORK
Juguryan G. Armen
Professor, doctor of science, “MFB” Financial Academy
Jarmen1@yandex.ru,
Khachatryan N. Nonna
Assosiate prof., Phd, YSU
Nonka-J@yandex.ru
Key words: Basel III, capital buffer, pro-cyclicality prudence, risk management,
limitation of profit distribution
Basel III sets out two key buffer measures to address pro-cyclicality prudence: a capital conservation buffer and a countercyclical capital buffer. Capital conservation requirement is aimed at preventing the loses of financial crisis. The countercyclical buffer requirement is aimed at ensuring that the banking sector builds up its capital defenses in periods when credit has grown to excessive levels. In article is illustrated issues of implementation pro - cyclicality requirements’ in banking system RA.
Джугурян Армен Геворкович
проф., доктор экономических наук, “МФБ” финансовая академия
Хачатрян Нонна Николаевна
Доцент, кандидат экономических наук, ЕГУ
ПРОБЛЕМЫ ПРОЦИКЛИЧНОСТИ В РАМКАХ БАЗЕЛЯ III
Ключевые слова: Базель III, буфер капитала, предотвращение процикличности,
управление рисками, ограничение распределения прибыли.
Базель III определил два ключевых критерия, нацеленные на противостояние процикличности: буфер консервативного капитала и процикличный буфер. Требование к консервации капитала целенаправлено на предотвращение убытков от дальнейших финансовых кризисов. Необходимость формирования процикличого капитала проявляется в буме кредитования бизнеса, целю которой является защита банковского капитала в будущем. В статье трактуются проблемы реализации требований процикличности в банковской системе РА.
Armen Gevorkowich Juguryan
Armenian Northern University, 39 Alex Manoogian str, Yerevan 0025, Republic of Armenia, Jarmen1@yandex.ru
Nonna Niklolaevna Khachatryan
Yerevan State, University, 1 Alex Manoogian str, Yerevan 0025, Republic of Armenia, nonka-J@yandex.ru
Strategic Management Accounting Functions in Agribusiness
Abstract
This paper explaining, how the basic form of strategic management accounting focuses on provision and analysis of decision making data in agribusiness and its competitors in order to monitor and develop business options. While traditional management accounting focuses on analysis of existing activities, with strategic accounting there is a concern that performance indicators should be relative with a continuous recognition of rivalry with competitors. From this point, discussed necessities and peculiarities of organization strategic management accounting in agribusiness considering to competitive decision making.
The current condition in Armenian agrarian sector provides a wide opportunity for development of entrepreneurship in different fields of agribusiness. The basic directions for profitable investments include, first of all, processing capacity building and rational distribution of the production potential among players in agricultural raw product production, especially in vegetable, grape, fruit, potato, and dairy production. But the same time, agricultural services and production tools are still weakly developed in Armenia and not in competitive level. Looking for progressive technologies in organization of agricultural production, in particular – in establishing intensive apricot, peach, sweet cherry, apple, and grape orchards is coming necessary. Increasing post-harvest infrastructures such as cool storages and fruit driers, packaging and export of agricultural products have export capacity.
In our days, Armenian agricultural sector to sink in competitive positions. In relation on to the rest of the economy, the role of agriculture declined slightly between 2007-2010, and after it slowly going up. Although around 44% of Armenian employed population in current is involved in agriculture, the majority of them are householders (see table 1) and consequently is not actively using tools of strategic management accounting, which is complicated and requiring more business activity knowledge’s.
Table 1
Structure Agricultural Products By Farms in Armenia
(at current prices, in %)[1]
2007 2008 2009 2010 2011
Total 100 100 100 100 100
of which:
commercial organizations 2,9 2,8 3,2 3 3,1
household’s plots 97,1 97,2 96,8 97 96,9
Management accounting statements should have to be useful for strategic planning and control and provides brief introductions to strategic variance analysis, profit-linked performance measurement models and balanced scorecard. It shows two multi-period: multi product models are specified, can be related to Porter's strategy framework, and cost - revenue drivers, can be used to support strategic planning, control and cost management. If management accounting information systems are to be useful for strategic purposes, that is, to help managers increase the likelihood, that they can achieve their strategic goals and objectives, and must follow from firms' missions and competitive strategies. Thus, strategic management accounting serves strategic decision makers by providing information on the financial implications of alternative business strategies.
Strategic management information are the catchphrase in today’s business competition. Agricultural business units are not only measuring productivity and insisting on improvements, but also insisting that quality means bringing to market products that satisfy customers, improve sales, and increase profits. With greater competition in the manufacturing environment defined by cost, quality and time issues, there exists a prevalent conviction that conventional accounting-based measures of organizational performance.
It is argued, that the traditional approaches of managerial accounting have limited evidence of technical development in response to the major changes in manufacturing technology in the past 15 years. Management accounting was the captive of financial reporting. Consequently there was a need for developing a management accounting project oriented towards the strategic accounting rather, than the management control process. Performance measurement systems should explicitly incorporate models of profit-generating processes, so, when managers take actions the models suggest will improve performance along one or more dimensions, the intended improvements are likely to materialize. Thus, the models should incorporate relationships over time as well as contemporaneous relationships and linkages capturing cause and - effect relationships between constructs and measures of performance throughout the firm (horizontally and vertically; aggregated to disaggregated; across the entire value chain). Finally, the measures should also have 'good' theoretical and empirical measurement properties.[2]
The term strategic management accounting has been used to describe the process of ‘provision and analysis of management accounting data about a business and its competitors for use in developing and monitoring business strategy’. It is possible illustrate the basic ideas of strategic management accounting by looking at one of the leading agribusiness companies, which has tailored its key performance indi-cators to the economics of its business. Agribusiness approach in linking its goals and its management information systems demonstrates many of the principles of strategic management accounting. The business units has decided how it is going to compete, reviewed its internal and external operations and chosen key performance indicators that enable it to monitor the development of its chosen business model. The search for data is driven by decision needs rather, than by what is simply easily available or fashionable. Traditionally, management accounting is presented as a matter of fitting cost systems to particular business environments and technological tasks.
Strategic choice means that companies can choose which agro technologies and products they want to compete in, but it also means, that different companies in the same industry may decide to adopt different strategies with quite different implications for management accounting and control. For example, an agribusiness unit strategy may determine whether management will be concentrating on a tight control of costs, maintaining quality or generating new product ideas. Furthermore, as more and more reliance is placed on bought-in goods and services, a higher proportion of costs are generated by a firm’s suppliers, which suggests that major improvements in cost, quality and innovation are potentially available through the effective management of the firm’s supply chain. Overall, the main distinguishing feature of strategic as opposed to traditional management accounting is the recognition that managers may have some freedom to choose which field of agribusiness they operate in, which technology is used and how the organization is structured. Thus rather than passively adapting to given competitive, technological and organizational circumstances, strategic management accounting helps managers make choices through information support.
Strategic management accounting is also concerned with the implementation of chosen strategies setting up control systems that drive through the chosen strategies. For example, if a agribusiness wishes to pursue a low cost strategy then traditional budgetary control may help implementation. However, few business units compete on price alone, so additional performance measures may be non-financial, such as delivery or queuing time.
Finally, in some agribusinesses, strategy is seen as involving organizational learning rather than as a top-down, centralized process, because of small sizes of household’s plots. In this business model, management accounting may be used as part of an interactive communication process both within the organization and between the organization and its customers and suppliers.
In many instances, strategic management accounting may involve new applications of existing approaches rather, than new techniques. For example, strategic management accounting that attempts to measure competitors’ or suppliers’ costs may well use the same sort of techniques, that we have already using in traditional managerial accounting system. Yet the context of the cost analysis will be different, because strategic management seeks to establish relative market positions and relative costs. Indeed, an awareness of competitive conditions is the main disting-uishing feature of strategic compared with more traditional management accounting.[3]
Financial Traditional
Accounting Managerial
System Accounting
1. cost and revenue driver analysis
2. value chain analysis
3. competition positioning analysis
4. cause and - effect relationships analyzing
strategic managerial accounting framework
traditional managerial accounting
Fig. 1 Strategic management information system
Strategic management accounting practices exist in different forms within companies seeking to use both financial and non financial information as well as external market-based information. It is also subject to wider contextual influences including production-specific effects. Strategic management accounting systems include a wide array of techniques. The balanced scorecard, profit-linked performance measurement systems and strategic variance analysis are common and well utilized. Their implementation and effects on agribusiness units are best considered in visionary and creative terms. Apart from cost and benefit analysis, understanding organizational context from a long-term spectrum is the key to the implementation of an effective strategic management accounting system. Once managers have specified and estimated a model for their specific context, they can use it to facilitate strategy formulation and implementation, and to support an on-going, evolutionary process of motivating and monitoring progress toward strategic goals and objectives, adapting choices in response to feedback obtained (continuous improvement). [4]
The design and use of strategic cost management systems are oriented around the application of following basic tools:
o cost and revenue driver analysis,
o value chain analysis,
o competition positioning analysis,
o cause and - effect relationships analyzing (fig. 1).
Important developments during the past two decades include activity-based costing and management, target costing, life-cycle costing, customer profitability and value analysis, and models for measuring and managing quality, environmental and capacity costs. These systems are designed to provide managers with relevant, accurate and timely information, by highlighting previously hidden costs, related non financial data and inherent trade-offs between cost categories, so managers can identify opportunities for improvement, weigh trade-offs, set priorities, and take actions to reduce costs and increase revenues which are consistent with intended strategies. Profit-linked models can be refined in many ways to make them more useful for strategic cost management.
Conclusion
As management accounting continues to develop and become more involved in the strategic management of the agricultural activity, it is important for management accountants to understand not only how to account for strategic initiatives, but also how these initiatives should be implemented and managed to achieve maximum benefit for the agribusiness.[5] As an agricultural business environments have become increasingly dynamic and competitive, it has become progressively more important for managers to develop rational, internally and logically consistent business strategies and to have tools and models which provide useful information to support strategic decision-making, planning, implementation and control. In response to these needs, there have been many important developments, in both management accounting research and practice, that focus on the use of accounting data and related information regarding strategy and operations for these purposes. In addition, the information constructs, and their measures, must be causally linked, which will make more efficiently strategic managerial accounting in agribusiness decision making process.
REFERENCES
1. Statistical Yearbook of Armenia, 2012, page 292
2. Johnston, H. H., and R. D. Banker, "The Validity of Profit-linked Performance Measures as Indicators of Low Cost and Product Differentiation Strategies”, // Empirical Evidence from U.S. Airlines following Deregulation, Working Paper, October 2000, pp. 409-422
3. Turney, P.. How activity–based costing helps reduce cost, //Journal of
Cost Management 5, (Winter): 2001, pp. 29–35.
4. Ahire, S. L., D. Y. Golhar, andM. A.Waller.. Development and validation
of tqm implementation constructs, // Decision Sciences 27 (1), 1996 pp. 23–56.
5. Juguryan A., Managerial accounting, (manual), //”Tntesaget”, 2003 pp.112-115 (in Armenian)
ФУНКЦИИ СТРАТЕГИЧЕСКОГО УПРАВЛЕНЧЕСКОГО УЧЕТА В АГРОБИЗНЕСЕ
Джугурян Армен Геворкович, Хачатрян Нонна Николаевна
Агробизнес в Армении в основном сосредоточен в рамках малых и средних фермерских хозяйств, где наряду с финансовым и налоговым учетом редко используется стратегический управленческий учет. В статье рассматриваются функции стратегического управ¬лен¬ческого учета в агробизнесе и анализируются основные инструменты учетной политики в процессе формирования информационной базы применения эффективных управленческих решений. Также дана сравнительная трактовка традиционного и стратегического управ¬ленческого учета.
A. Jugurayan
“MFB” Financial Academy
N. Khachatryan
Yerevan State University
MANAGERIAL ACCOUNTING ISSUES IN AGRICULTURAL HOLDINGS
Abstract
This paper discusses the design characteristics should have to be useful for strategic planning and control and provides brief introductions to strategic variance analysis and profit-linked performance measurement models in agricultural holdings. The intend characteristics management accounting systems should have to be useful for strategic planning and control and provides brief introductions to strategic variance analysis, profit-linked performance measurement models in various agricultural divisions.
Keywords: strategic accounting, agricultural holding, management accounting systems
In the pre-independence period the agro industrial complex was the second largest sector of the economy in Armenia, having about 21% of productive output and about 27% of employment. Around 16,600 specialists were involved in agricultural activates, including 7,400 agronomists and veterinarians. Livestock productivity on was central to Armenian agriculture in the pre-independence period, both in terms of the amount of resources employed (around 75% of agricultural labor force and 80% of agricultural land) and aggregate value created. About 80% of Armenian agricultural imports were related to livestock products, including feed additives’, veterinary supplies and milk powder. At the same time, production was generated in collective farms, having high level of mechanization, quality supplying and human recourses.
In our days, Armenian agricultural sector to sink in competitive positions. In relation on to the rest of the economy, the role of agriculture declined slightly between 2007-2010 (see table 1), though employment in the sector has also gone down. In absolute terms the contribution on to the value added by agriculture has gone up by 24% over the same time period. Although around 44% of Armenian employed population in current is involved in agriculture, the majority of them are householders (see table 2). In addition, in rural com¬munities in 2010 about 38% of income came from agriculture (if one combines monetary and non monetary income). Slightly less than half of this came as monetary income generated by the sale of agricultural products. Additionally 29% of rural income came from wage employment and 20% came from pensions and social payments. about 9% came from remittances.
Currently the one of peculiarities of Armenian agricultural economy is low level of production forces concentration and slow agricultural holding formation process. Another significant barrier to agricultural development in Armenia is market competition. This can be broken down into three separate problems: first, the ease with which farmers can get their produce to markets inside Armenia; second, their access to markets outside of Armenia; and third, the competition on that Armenian producers face from foreign competitors.[1] Each of these presents different challenges and opportunities, which is from our point of view, can have efficient solutions through of agricultural holdings formation process.
Table 1
Volume Indexes Of Agricultural Output By Farms in Armenia
(at comparable prices in % to previous year) [2]
Years
Total
commercial organizations household’s plots
2007 109,6 135 109,3
2008 101,3 88,4 101,7
2009 99,5 103,6 99,3
2010 86,4 98,4 86,1
2011 113,9 102,2 114,4
At present in Armenia is performing a few holdings, partly enchanting agricultural activity, such us Multy Group, Grand Holding, which are spe¬cialization for tobacco or livestock production area. The concept of this agricultural holdings can provide a common basic unit for measuring agricultural activity, and the land used for this activity, in that way permitting the integration of results concerning the different functions of agriculture activity (production, natural resource manag¬ement, land use, com¬merce etc.). From this point, is coming actual strategic ma¬nag¬ement imple-men¬tation in agricultural holdings, having purposed for identi¬fication specific economic incentives from associated different agribusiness field.
Table 2
Structure Agricultural Products By Farms in Armenia
(at current prices, in %)[2]
2007 2008 2009 2010 2011
Total 100 100 100 100 100
of which:
commercial organizations 2,9 2,8 3,2 3 3,1
household’s plots 97,1 97,2 96,8 97 96,9
To generate a sustainable competitive advantage, a strategy of agricultural holdings must first of all establish a unique market position based on low cost leadership, product differentiation, or a workable combination of the two, with an appropriate scope of markets, also be differentiated from competitors' strategies, through unique product variety, ability to satisfy customer needs, and/or access to particular customer segments. And finally employ chains of complementary, value adding activities which are difficult for competitors to replicate.[3]
Strategic management accounting practices exist in different forms within companies seeking to use both financial and non financial information as well as external market-based information. It is also subject to wider contextual influences including industry-specific effects. Strategic management accounting systems include a wide array of techniques. The balanced scorecard, profit-linked performance measurement systems and strategic variance analysis are common and well utilized. Their implementation and effects on companies are best considered in visionary and creative terms. Apart from cost and benefit analysis, understanding organizational context from a long-term spectrum is the key to the implementation of an effective strategic management accounting system.
If management accounting information systems are to be useful for strategic purposes, that is, to help managers increase the likelihood that they can achieve their strategic goals and objectives, their designs and use must follow from firms' missions and competitive strategies. The design and use of strategic management systems are oriented around the application of three basic tools: cost and revenue driver analysis, value chain analysis, and strategic positioning analysis. Important developments during the past two decades include activity-based costing and management, target costing, life-cycle costing, customer profitability and value analysis, and models for measuring and managing quality, environmental and capacity costs. These systems are designed to provide managers with relevant, accurate and timely information, by highlighting previously hidden costs, related nonfinancial data and inherent trade-offs between cost categories. In this case managers can identify opportunities for improvement, weigh trade-offs, set priorities, and take actions to reduce costs and increase revenues which are consistent with intended strategies. Profit-linked models can be refined in many ways to make them more useful for strategic cost management.
Cost Flow Product Cost
Accounting Calculation
Managerial
Accounting
Business Activity Strategic Managerial
Analyzing Accounting
Figure 1 The suggested fields of managerial accounting in agricultural holdings
In agricultural holdings the chosen model of managerial accounting, have to be determines the agribusiness critical success factors, such as delivering superior product and service quality or achieving economies of scale, improving productivity and delivering. More to the point, the managerial accounting should be informs choices regarding the design of products and configuration of operations which drive costs and revenues in agricultural activity. For a set of performance measures to exhibit content validity in a strategic context, then, it must measure constructs related to the mission and strategic framework of agricultural holdings, critical success factors, and operating choice variables.
Conclusion
In Armenian agricultural accounting practice the managerial accounting pretty nearly in use, having mostly implementation only in cost flow and product cost calculation [4]. The Chart of accounting in Armenia is not taking into consideration special accounts for registration financial result variances of business activity and accordingly, in agricultural holdings in current, there are strategic management process information supplying gaps. Consequently, our suggestion is to organize multifaceted managerial accounting system in agricultural holdings, simulta¬neously with cost accounting and production cost calculation, having also incorporation strategic management accounting tools (see figure 1). If management accounting information systems are to be useful for strategic purposes, that is, to help managers increase the likelihood that they can achieve their strategic goals and objectives, their designs and use must follow from firms' missions and competitive strategies. Apart from cost and benefit analysis, understanding organizational context from a long-term spectrum is the key to the implementation of an effective strategic management accounting system.
References:
1. Comparative analyses of agriculture in a south Caucasia, //UNDP research, 2013, pages 94-96
2. Statistical Yearbook of Armenia, 2012, page 292
3. Alireza Azimi Sani, Strategic management accounting: implementation and control, //World Academy of Science, Engineering and Technology (59) 2011, page 57
4. Juguryan A., Poghosyan A., Financial control in agribusiness (monograph), “Edit Print”, Yerevan, 2011, page 41
Джугурян Армен Геворкович
Проф. “МФБ” Финансовой академии, д.э.н.
Хачатрян Нонна Николаевна
Доц. Ереванского государственного университета, к.э.н
ПРОБЛЕМЫ УПРАВЛЕНЧЕСКОГО УЧЕТА В АГРАРНЫХ ХОЛДИНГАХ
В статье обосновывается необходимость ведения стратегического учета в крупных аграрных организациях и холдингах, что даст возможность для информационного обеспечения при принятии эффективных управленческих решений по укреплению конкурентоспособности агробизнеса. В частности, пред¬лагается в действующей практике системе управленческого учета добавить элементы оценки отклонений от стратегических целей агробизнеса и представить отчетность для перспективного экономического анализа.
Armen Gevorkovich Juguryan
prof. at the Northern University of Armenia
Jarmen1@yandex.ru
Rishma Rajesh Vedd
prof. at the California State University, Northridge CA
rishma.vedd@csun.edu
Nonna Nilolaevna Khachatryan
assistance prof. at the Yerevan State University
Nonka-J@yandex.ru
TAX PLANING ISSUES IN UNIVERSITES OF ARMENIA
Tax planning is a widely used practice in the commercial organizations financial management, but there are still many non profit organizations and universities, which fail to fully-recognize their potential tax savings. The Armenian universities tax respon¬sibilities formation process approving, that this organization are paying more tax than necessary over the years. With the right knowledge and a good tax payment strategy plan they can legally keep away from overpaying and do not involved in Armenian large taxpayers registration list, as they are. In article is made suggestions for tax deductible strategy implementation approaches’ in universities, in order to removed saved money to increasing quality of higher education providing.
Key words: higher professional education providing, tax deductible items,
tax planning strategy, tax liabilities reductions tools.
Tax planning entails creating portfolios or circumstances that are as tax efficient as possible. This requires business entities and non profit organizations to give consideration not just to the size of their incomes or profits, but also to the nature and timing of purchases, expenses coverage and the types of investments they make.
Higher education providing taxation process is always in contention subject among economist and fiscal policy executors. The debate whether university education should be “free of tax” seems misconstrued. From the viewpoint of justice, a strong case can be made in higher education for adopting the beneficiary pays principle, and for institutionalizing it in the form of a graduate tax. From the perspective of justice will focus on the comparison between a “free” university system funded through the general tax system on the one hand, and one financed through a graduate tax on the other. On the beneficiary pays principle defended here, the regressive nature of the general-tax-funded higher education system renders it unjust.
Traditionally, university activity financing sources is mainly available by governmental supporting, such as subsidiaries, grand’s, public finance and sponsorships. But in our days, the higher education providing is recognizing not only contrivance for improvement of human capital and thoughtful field from government, but mostly considering as a business, involving huge financial sources and results, which is going under taxation [1].
Education is the best means for the vast majority of people to improve their economic position. It is the most reliable means that people have to invest in themselves and improve their earning potential. Yet the tax system today “punishes” people who invest in education, virtually doubling its cost.
According to Armenian tax legislation, higher education tuition expenses is not tax deductible in students family incomes taxation system framework. But in opposition to this, contributions to certain not-for-profit educational organizations are generally tax deductible. Salaries of teachers and others in education are subject to income and payroll tax. Further more, the current tax system, in stark contrast, treats education expenditures very unfavorably for Armenian universities. Consequently, the most of Armenian Universities currently involving in large tax payers list and every year increasing their direct tax responses to government (see figure 1), related to payroll tax and profit tax. more to the point, it is not acceptable from effective taxation policy position, because at present tuition fees in Armenia is free of indirect tax, such us value added tax, and as a result in this condition, is possible to reduce taxable income by making educational providing expenses equal on universites income collections.
Moreover, next to increasing of universities tax responsibilities, the recent period expenditures of State Budget of Armenia to Education gradually is declining (see figure 2), which is from our point of you, making non harmonistic condition in higher education providing system. As a result, up to date period the higher education tax responsibilities is more, then governmental supporting to Armenian universities, which is at last promoting students tax burden extension.
Figure 1 Armenian large universities recent direct tax responsibilities
(in thousands AMD) [2]
Armenia’s strong economic growth from 2001–2008, when real GDP grew 12.6 percent per year on average, boosted living standards and created the fiscal headroom necessary for the Government to respond to the 2009 financial crisis with a large fiscal incentives. As a result, the fiscal deficit reached 7.6 percent in 2009 and helped limit the reduction in real GDP to 14 percent. With the economy growing again, the incentives has to be gradually withdrawn. However, the retrenchment will need to be designed carefully to limit negative impact on growth.
Improving the efficiency of all aspects of public finances - tax policy, tax administration, and public expenditures - will be crucial to the planned fiscal adjustment. With the ratio of tax revenues to GDP lower than that of comparator countries with similar levels of income per capita, the impact of the fiscal consolidation should be borne by an increase in tax revenues (the lower leap estimated to be between 2.3 and 5.8 percent of GDP).
Figure 2 Expenditures of State Budget of RA to Education (in mln AMD) [3]
Other similar types of problems arise from the use of years of school¬ing and income to test the hypothesis, that more education makes a person more productive. For instance, more years of schooling may just represent another more important factor in the determination of income, like social differences related to parental background; or the fact that specific communities have access to specific networks (plumbers instead of bankers); or certain social groups have particular ways of speaking, dressing, behaving, etc.. Alternatively, there may be a social or signaling bias that leads to giving higher wages to people with more years of schooling (credentials like high school diplomas, univer¬sity degrees, etc.) despite the fact that these people are not actually more productive.
In this case the problem with the economic research is not only that years of school¬ing may be unrelated to productive capacity, but also that productive capacity may be unrelated to earnings (see figure 3).
Higher education can lead to economic growth through both private and public channels. The private benefits for individuals are well established, and include better employment prospects, higher salaries, and a greater ability to save and invest. These benefits may result in better health and improved quality of life, thus setting off a virtuous spiral in which life expectancy improvements enable individuals to work more productively over a longer time further boosting lifetime earnings. From another hand, public benefits are less widely recognized, which explains many governments’ neglect of tertiary schooling as a vehicle for public investment. But individual gains can also benefit society as a whole. Higher earnings for well-educated individuals raise tax revenues for governments and ease demands on state finances. They also translate into greater consumption, which benefits producers from all educational backgrounds.
thinker jobs, specialization, productivity
Private
Economic
Growth
Increased Spending
Higher Auxiliary
Education Incomes
Tax returns
Savings
Poverty
Public Reduction
governance, safety, social development
Figure 3 Conceptual Framework of Education and Economic Growth Relation
Although tax laws are complex and constantly changing, there are always opportunities to increase universities tax refund and minimize their tax liability. It is necessary to gain an insight into legal tax-reduction strategies and knowledge of
implement these strategies with the goal of increasing universities income. Some of the following strategies are designed to be implemented and, by using them effectively, the higher education providing service will save on tax.
First of all, tax strategy that universities have to implement immediately involves maximizing tax deductions on financial year with the aim of reducing taxable income. It possible by bringing forward tax deductions into the current financial year, such as purchasing edifying equipment and literary materials, accordingly formatting additional deductible expenses. Thus, by removing for next year scheduled expen¬ses to the current financial period, the universities coming to tax reduction and saved related financing sources reinvesting in educational process, instead of paying as a tax liabilities.
Secondly, the universities during making tax planning must generate tax deductible drivers, bases on student and trainers quantity. For example, each trainer can look upon as a potential tax deductible entity, taking into consideration their over qualification expenses, honoraria for extra scientific or pedagogical work, participation to outreach workshops and conferences, which is entail additional tax deductions. Accordingly, in universities during operation of tax saving strategy, each student is also may considered as a potential tax deductible entity, by involving them in international mobility programs, organizing training in order for obtaining extra theoretical knowledge’s and professional skills. Hence, in case of arising substantial tax liabilities in financial year, the universities must to use above mentioned tax deductible drivers in order for legalization their tax liability reductions. Some of the following strategies are designed to be implemented immediately and, by using them effectively, the universities can save on tax every year and removed this money to education quality assurance keeping process.
Thirdly. the universities during making tax planning must to implement differd taxation tools. Accomplishment of current tax assets and liabilities recognition in Armenian companies bases on following principles. Current tax for current and prior periods should, to the extent unpaid, be recognized as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess should be recognized as an asset. When a tax loss is used to recover current tax of a previous period, an enterprise recognizes the benefit as an asset in the period in which the tax loss occurs because it is probable that the benefit will flow to the enterprise and the benefit can be reliably measured. A deferred tax liability is recognizing for all taxable temporary differences. When the carrying amount of the asset exceeds its tax base, the amount of taxable economic benefits will exceed the amount that will be allowed as a deduction for tax purposes. This difference is a taxable temporary difference and the obligation to pay the resulting income taxes in future periods is a deferred tax liability. As the enterprise recovers the carrying amount of the asset, the taxable temporary difference will reverse and the enterprise will have taxable profit. This makes it probable that economic benefits will flow from the enterprise in the form of tax payments.
Consequently, current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period. Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.
Temporary differences are differences between the carrying amount of an asset or liability in the balance sheet and its tax base. Temporary differences may be either:
• taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled; or
• deductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asset or liability is recovered or settled.
Tax assets and tax liabilities in Armenian enterprises presented separately from other assets and liabilities in the balance sheet. Hence, deferred tax assets and liabilities is distinguished from current tax assets and liabilities. When an enterprise makes a distinction between current and non-current assets and liabilities in its financial statements, it is not classifying deferred tax assets (liabilities) as current assets (liabilities).
Recognizes differed tax liabilities gradually declining in future, in financial statements Armenian organizations bringing tax expenses, differed tax actives, is making deductible expenses in future taxation process. When in financing and tax accounting incomes and expenses is been timing congruent, its not making differed tax actives and liabilities’.
Conclusion
Logical analysis of a financial situation or plan from a tax perspective, to align financial goals with tax efficiency planning. The purpose of tax planning is to discover how to accomplish all of the other elements of a financial plan in the most tax-efficient manner possible[4]. Tax planning thus allows the other elements of a financial plan to interact more effectively by minimizing tax liability. Tax planning encompasses many different aspects, including the timing of both income and purchases and other expenditures, selection of investments and types of retirement plans, as well as filing status and common deductions. However, while tax planning is an important element in any financial plan, it is important to not let the "tax" tail wag the financial "dog." [5] This can ultimately be counterproductive, as virtually all courses of financial action will have some tax consequences, and they should not be avoided solely on this basis.
Tax planning is a widely used practice in the commercial world but there are still many non profit organizations and universities which fail to fully- recognize their potential tax savings. The Armenian universities tax responsibilities coming to show us, that their are paying more tax than necessary over the years. With the right knowledge and a good tax payment strategy plan they can legally avoid overpaying and do not involved in large taxpayers registration list.
Some of the following strategies are designed to be implemented in order of tax payments saving in universities, such us bring forward tax deductions, accelerate tax deductible educational items, taking into consideration capital gains discounts, using tax offsets, setting up tax deduction drivers and implementing them in case of move up universities taxable responsibilities in reporting financial year.
Incidentally, IAS 12 describes recognition and measurement of deferred taxes using a temporary difference approach, similar to the method of FAS 109, Accounting for Income Taxes. Although there are significant differences in the treatment of tax basis, uncertain tax positions and recognition of deferred tax assets and liabilities, FASB and IASB working on the issue of differences. The IASB (International Accounting Standards Board) issued an Exposure Draft of an IFRS to replace IAS 12 Income Taxes with the intention of eliminating many of the differences between the IFRS and FASB standards.
Tax Accounting US-RA Comparative Interpretation making conclusion, that there are several differences between IFRS and GAAP relating to accounting for and reporting of income taxes:
Firstly, the tax rate used for measuring deferred taxes under GAAP is the enacted tax rate in place when the timing difference is expected to reverse, whereas under IFRS, the substantially enacted tax rate is used.
Secondly, under GAAP, the classification of the deferred tax asset or liability is either short-term or long-term depending on the underlying relationship of the timing difference. Under IFRS, deferred tax assets and liabilities are always recorded as long-term.
Thirdly, under GAAP (for non-public companies), a reconciliation of the expected tax expense to actual is not required in detail and only a disclosure of the nature of the reconciling items is required. IFRS requires the complete reconciliation, including the nature and amounts.
References:
1. Juguryan A., Khachatryan N., Professional Education providing Economy, (manual in Armenian), “Edit Print”, Yerevan, 2010, pp 34-35
2. State Revenue Service website, www//taxservice.am
3. Armenian State Statistical Service website, www//armstat.am
4. USAID Technical Assistance to Support Tax Administration Reforms (TASTAR), Final Report , page 8
5. The cost of tax compliance in Armenia, IFC Report, Yerevan, 2011, pp.59-60
6. . “Income Taxes”, International Accounting Standard No. 12 (IASCF), as mended effective January 1, 2009. item 11
7. FASB ASC 740-10-35: Income Taxes-Overall-Subsequent Measurement “Accounting for Income Taxes, Statement of Financial Accounting standards No. 109. 2005, item 3
Ճուղուրյան Արմեն Գևորգի
Հայաստանի հյուսիսային համալսարանի պրոֆ, տ.գ.դ
Ռիշմա Ռաջես Վեդ
Կալիֆորնիայի պետական համալսարան, Նորդ Ռիչ
պրոֆ., Ph.D
Խաչատրյան Նոննա Նիկոլայի
ԵՊՀ դոցենտ, տ.գ.թ.
ՀԱՐԿԱՅԻՆ ՊԼԱՆԱՎՈՐՄԱՆ ՀԻՄՆԱԽՆԴԻՐՆԵՐԸ ՀԱՅԱՍՏԱՆԻ ՀԱՄԱԼՍԱՐԱՆՆԵՐՈՒՄ
Հարկային պլանավորւմը իր լայնածավալ կիրառումն է գտել առևտրային կազ-մակերպությունների ֆինանսական կառավարման համակարգում, սակայն դեռևս գոր¬ծում են ոչ առևտրային կազմակերպություններ և համալսարաններ, որոնք առայժմ լիարժեքորեն ի նկատի չեն առնում իրենց հարկային պոտենցիալ տնտե¬սումները: Հայաստանյան բուհերի հարկային պարտավորությունների ձևավորման ընթացքը գալիս է ապացուցելու, որ տարեց տարի այդ կազմակերպությունները առավել հար¬կեր են վճարում, որը նպատակահարմար չէ: Հարկային վճարումների ռազմա¬վարու¬թյան անհրաժեշտ գիտելիքների առկայության պարագայում այդ կազմա¬կեր¬պու¬թյունները կարող են օրինական ճանապարհով կրճատել իրենց հարկային պար-տա¬վո¬րու¬թյունները և չհայտնվել ՀՀ խոշոր հարկատուների ցուցակում: Հոդվածում առաջար-կություններ են արվում համալսարաններում հարկային նվազեցումներ ապահովող ռազ¬մավա-րության մոտեցումների կիրառման ուղղությամբ:
Հիմնաբառեր. բարձրագույն մասնագիտական կրթության ծառայություններ,
հարկային նվազեցումների հոդվածներ, հարկային ռազմավարական
պլանավորում, հարկային պարտավորությունների կրճատում
Джугурян Армен Геворкович
проф. Северного университета Армении, д.э.н
Ришма Раджес Вед
Калифорнийский государственный университет, Норд Рич
Проф. Ph.D
Хачатрян Нонна Николаевна
доцент Ереванского государственного университета, к.э.н.
ПРОБЛЕМЫ НАЛОГОВОГО ПЛАНИРОВАНИЯ В УНИВЕРСИТЕТАХ АРМЕНИИ
Налоговое планирование широко используется в финансовом менеджменте коммерческих организаций, однако до сих пор многие некоммерческие организации и университеты Армении полностью не оценивают свои потенциальные возможности в сфере экономии налоговых платежей. Процесс формирования налоговых обязательств Армянских университетов доказывает, что с каждым годом эти организации платят все больше налогов, что и нецелесообразно. При правильном осознании плана налоговой стратегии эти организации смогли бы легальным путем сократить налоговые обязательства и не оказаться на сегодняшний день в списке крупных налогоплательщиков Армении. В статье предлагаются подходы применения стратегий налоговых вычитаний в университетах.
Armen Tshuguryan
Professor of Northern University, Armenia
Doctor of Economics
E-mail: Jarmen1@mail.ru
Nune Srapyan
Head of the Department of International Relations of
Northern University
E:mail: nune_18@mail.ru
BOLOGNA MOTIVES IN THE CONTEXT OF GLOBALIZATION
ABSTRACT
As a rule, in professional literature Bologna process is analyzed in terms of building a single European educational area leaving the comments of educational market global competitiveness in the shadow. The article is an attempt to represent Bologna process motives not only from European but also from geopolitical perspective.
Did Bologna process start only on the basis of educational motives?
The core and supreme purpose of Bologna process is formation of European higher education area, the necessity for which was observed two decades ago. Now it has become urgent. However, Bologna process started not only on the basis of educational motives. The reasons were more profound and troubling for Europe.
First, common labor market in Europe is rapidly developing. Higher education specialists, freely moving within the territory of European Union, are given various estimates by employers of various countries. Therefore, now mutual recognition of diplomas awarded to graduates of European Universities and formation of mutual trust towards quality of education is considered to be very important, and it is possible to implement by forming a single educational area.
Within the territory of European Union not only graduates with higher education but also students and staff of Universities have started to participate in mobility. So preparation of the same specialists in different Universities and countries according to the unified educational standards has become a necessity and formation of European higher education area can significantly contribute to it.
And finally, Europe's attractiveness and competitiveness in the fireld of educational services has also become a question of agenda. Currently provision of educational services is not only a major factor in formation of human capital, but also a business. Thus, according to the involvement of international students USA is considered to be a leader and ensures large inflows of educational fees from Europe as well. Therefore, in terms of competitiveness formation of European higher education area will be able to adequately respond to global challenges.
Chart 1 Bologna process main motives
Thus, the main motive of Bologna Process was not only the establishment of unified European educatioanal area, it also suggested political and economnic interests. (see chart 1)
What impact did Bologna process have on EHEA University environment?
In 2010 European University Association published report "TrendsVI" dedicated to higher education changes occurred during the last decade. The report consisted of 4 parts, the first one introduced Bologna process impact on European university environment during the last decade. Particularly, regarding the question what changes have occurred in quality assurance process during the last decade 60% of European Universities stated that the changes are obvious. 53% of the Universities also noted that due to Bologna process cooperation with other Universities has become more active, and 45% agreed that during that time University autonomy has been expanded. (see chart 2). At the same time it was noted that due to Bologna process only 28% of European Universities has changed their academic policy, and 20% - educational fees.
The report does not include separate analysis for separate countries, but submitted European Higher Education Area (EHEA) maps (see Chart 3) give an opportunity to determine Armenia's position in the torrent of Bologna process. So, 54% of the Universities believes that European higher education formation process have had only positive impact on provision of educational services, 3 % thinks that it have not had any impact, and 38% finds that it have had both positive and negative influence. It is peculiar that our Republic is included in the report “Trends VI” in that zone of 54% positive impact evaluation and is represented in a group of 6 countries (Norway, Estonia, Ireland, Finland, Lithuania, Armenia) most positively responding to Bologna process.
Chart 2 Bologna process impact on European University environment
According to the report ''Trends'' in 2010 95% of European countries had already applied 3 degree system, and distribution of 40 studied countries in terms of completeness of system introduction was represented as follows: 37 countries - 85-100%, 3 countries - 70-85 %: According to European observers Armenia is among those 37 countries. Moreover, our Republic belongs to the rate of those 38 countries which apply European Syatem of Transfering Credits (ESTC). England is the only country which applies academic credits but not on ESTC base .
Chart 3 Degree of impact of Bologna process on countries of HEEA
Which are the economic motives of Bologna process?
Higher educational services have a tendency to grow in price and it is conditioned not only by high inflation rates registed in the global economy. Nowdays the requirements of labor market made to specialists are rapidly changing and becoming more demanding and high quality. As a result, skills and competencies of University graduates, formed in the course of education, may ''get old'' from the very start of their work.
Naturally, professional educational services should resist competitive challenges of the labor market and spend more resources for the purpose of ensuring necessary quality of education. It is not accidental that during the last decade higher professional education in European higher education area education price has increased by 16 %. Moreover, education and science expenditure portion in GDP of European countries passes the 5% threshold. It is natural that in the formed situation European countries should take measures to increase the effectiveness of educational expences, and Bologna process tools significantly contribute to it.
Thus, the transfer of academic credits implies not only academic freedom, it has also an economic context. In case of mutual recognition and acceptance of credits from other educational establishments the University does not spend resources any more on teaching a similar module and makes savings of educational costs. Granting joint diplomas by different universities pursues the same goal, as the costs of educational services provided to graduates are effectively distributed between universities thereby reducing cost price of education. Large-scale application of ongoing education system also contributes to cost price reduction of educational services, especially in such cases when Universities accept academic credits from non-university structures thereby ''being liberated'' from teaching some modules.
However, in terms of forming economic results Bologna process application tools are more vividly displayed not from the perspective of increasing efficiency of forming educational services cost price but from that of regulating labor market and alleviating unempoloyment in Europe. Each corner of the common economic area formed within the framework of European Union should be available for free movement of the workforce. So, Universities will strive to prepare such specialists who will be able to find job and be demanded by employers of different countries.
Chart 1.1
Proportion of unemployed people in groups with different levels of education 2011(%)
Academic degree EU Italy France Chezh Republic Poland
Secondary 14.4 11.9 12.3 15.5 41.7
Vocational 9.5 8.8 15 6.6 25.4
Higher 10.2 12.3 9.8 5.3 16.1
According to the statistics, proportion of unemployment in groups with higher education has lower level as they have greater demand in labor market. (see chart 1.1): So the main task of the University is preparing specialists meeting the requirements of globalizing economy.
By what political motives is Bologna process guided?
Bologna process is not just limited by educational framework and it is introduced as a variant of currently operating ways of globalization. Bologna process is a part of the general scenario according to which people, concepts, information and quality workforce should freely pass the state borders. And professional higher education consists of the above-mentioned components.
Studying basic documents of Bologna process from the first glance it becomes obvious that the task is directed not only to internationalization of educational services but also to occupation of competitive positions in global educational market. Of course, it is not explicitly mentioned in official documents, but Europe strives to respond to the challenges of overcoming advantages of USA educational system: a system which has been a world leader in the field of involvement of international students and export of educational services. In this regard, even in Salamank convention adopted in 2001 it is explicitly mentioned that ''European higher education institutions strive to become centers immersing talents from the world՛՛.
However, the framework of Bologna process political motives is not just limited by consolidation of potential of European higher educational services and provision of competitive positions towards Transcaucasia. There is also another task: to strengthen Western European values and expand democratization.
Europe established an idea that the University is a guarantor of traditions and eliminating political and geographical boundaries through its operation it takes a mission of appliance and interaction of different cultures. Based on this principle, on September 18, 1988, a Charter of University freedoms was adopted with following fundamental principles:
1. University is an establishment geografically formed with historical heritage, where research and education implemented for satisfaction of society’s needs must be independent of political and economic power.
2. Research activities and education should be unified and meet the changing requirements of the society.
3. Research and education freedom is the fundamental principle of university life. Rejecting intolerance and accepting dialogue style, the University is an ideal place for professors to develop research activities and transfering knowledge, as well as for students having desire to gain that knowledge.
4. For significant knowledge development there is a necessity for university, particularly, information exchange, as well as implementation of joint programs for education progress.
What does the trajectory of Bologna process social dimension look like?
If during the first years preceeding the launch of Bologna process the basic components ensuring its tools had been formed (quality assurance, academic credits accumulation and transfer, mutual recognition, education), leaving analysis of social consequences of the process on the background, then during London Communique a serious statement was made to promote all levels of higher education in the direction of social justice towards entering, studying and graduating students. It became clear that Bologna process could not run effectively, or it could even fail, if it would not have been based on social justice. For this purpose it was intended to take additional measures to organise students' education irrespective of their social and economic status, revealing flexible educational paths and providing educational services on an equal basis.
In addition to all this, Bologna process social dimension was clearly underlined during the conference in Leuven. It was decided that students should reflect the diversity of population of Europe aimimg at achieving equal rights for quality education. It includes improvement of educational atmosphere, elimination of all obstacles and establishment of relevant economic conditions so that students can be provided educational services for all levels.
It was also mentioned that each country-participant should set measurable targets for overall involvement in educational programs and improvement of various groups’ participation indexes in all levels, it should also develop standards and mechanisms for periodic review.
In addition, it was also suggested to increase the Universities’ responsibility for ensuring their graduates’ social perspectives (employment, career opportunities).
Chart 4 Distribution of migrant and non-migrant students in Universities of EHEA countries
(%)
Studies show that in EHEA countries the distrtibution of migrant and non-migrant students is not equal. In general, in all countries availability of higher education among migrants is significantly low. If in Netherlands, Czech Republic, Finland the ratio of migrant and non-migrant students is somehow equal, in Italy, Estonia there is a triple split emerging between them. Such distribution does not indicate social balance of students' admission in EAHA Universities. (see Chart 4):
Chart 5 The ratio of Bachelor students paying for education in 2010/2011 academic year(%)
Furthermore, applicants’ admission to Universities in a several countries of EHEA is conditioned by availability of higher education of their parents. The degree of connectivity between parents’ qualification and number of applicants is especially high in Slovakia, Romania, and Bulgaria, where parents’ psychological and economic support is great.
Naturally, economic and psychological influence conditioned by parents' educational qualification hinders provision of Bologna process social equability which is vividly manifested in RA. Today in Universities of our Republic the number of applicants from the region is gradually decreasing because of their domestic social-economic situation.
Paid education is an obstacle for Bologna process social equability. Studies show that in countries of EHEA this issue have different solutions. So, if in Scandinavian countries Bachelor's studies are for free, in France which is also a developed country the majority of Bachelor students study in paid system. (see Chart 5):
Chart 1.2
Dynamics of paid and state-funded places in Bachelor's educational system in RA State universities
Systems 2010/2011 2011/2012 2012/2013
State-funded 23% 26% 21%
Paid system 78% 74% 79%
100% 100% 100%
For comparison it should be mentioned that in RA all educational programs for Bachelor's studies are for paid, where state-funded system ranges from 32% to 35%. (see Chart 1.2).Particularly, applicants coming from regions cannot afford themselves studying on paid-system, thus higher education in our Republic is gradually becoming “elite'' which undermines the grounds of Bologna process social dimension.
What does Bologna process trajectory look like according to the held summits?
Bologna process motives are regularly changed not only based on geopolitical developments but also architecture peculiarities of unified educational area formation. Thus, the framework of implementation of this process does not remain unchanged and is being constantly reviewed during the summits held in the regional countries, the trajectory of which is represented in Chart 6.
At the launch of Bologna process the complexities had not been revealed yet, reduction of which would require a long time. Therefore, it was even initially scheduled to complete the process in a decade. However, at present ''romance'' of Bologna process is not vividly displayed and the countries of the region still have a long way to pass in this field.
Thus, if at the beginning of the process the main task was passing to a two-degree system in EHEA in a short period of time, then a few years later it became clear that it is necessary to introduce a three-degree system including doctoral studies. Even after passing this stage it was not possible to generalize professional education degree system, as some problems connected with the framework of education qualification degrees appeared and they have not been solved yet.
Quality assurance is also a key topic of discussion at Bologna process summits. Its incomplete implementation is a serious obstacle for transfer of credits and student mobility.
Mobility Comparable Social Internal and Quality Establishment Ensuring
Educational results of external assurance åof quality mobility for
Degrees mobility quality european assurance 20 % of
2 degree Diploma assurance standards register students
Education supplement Financing transparency
System ECTC mobility 2020 Ã.
Sorbonne Bologna Prague Berlin Bergen London Luven
Declaration declaration Communique communique commun. communique communique Yerevan
1998 1999 2001 2003 2005 2007 2009 2015
Europe of Measurable Ongoing Connectivity of Framework of Provision of National
knowledge learning learning science and qualification employability qualification
outcomes education degrees system
Application in EHEA
Of Academic quality assu - Doctoral studies
Credits rance
Chart 6 Bologna process trajectory according to the held summits.
Conclusion
Implementation of global competitive tendencies of Bologna process policy did not make us wait long. Some regions of Transcaucasia peculiarly responded to this process. However, the experience showed that in general Bologna process enforcement tools were considered acceptable out of European higher education area.
Asian region:
Australia came up as an initiator of establishing Asian-Pacific unified educational area, a regional zone which has the same functions as EHEA. According to Communiqué adopted on April 4, 2006, in Brisbane 27 regional countries announced formation of unified educational area, where student and staff mobility, credit exchange and, therefore, introduction of unified quality system are highly encouraged. Regional center for higher education and development, (RIHED), was established in Thailand, which introduces tools in compliance with Bologna process in countries joined Brisbane Communiqué in Pacific and Asian regions.
Latin America and Caribbean basin
Inter-American organization for higher education (IOHE) includes over 300 Universities from 26 countries of Latin America aiming at harmonizing higher education approaches in that region. IOHE organization develops common regional principles directed to mutual recognition of academic credits, quality assurance acceptance of diploma unified supplement.
Africa
African continent is also interested in creation of higher professional educational area. During the joint meeting of Higher education ministers of 18 countries of the region African Higher education harmonisation union was formed, mostly emphasizing mutual recognition process and quality assurance. Currently, that union has also set a task to strenghthen public responsibility of availability of providing higher educational services, which is very important for developing African countries. Moreover, the Union has a few ways of integrating Bologna process. (EUA, 2010).
Northern America
The origin and enforcement of the idea of academic mobility and credit system initially started in United States, which has been a world leader by involvement of International students until now. Therefore, in this region a serious attitude towards Bologna process should be shown in terms of maintaining competitive positions in global educational market. At present Pan-Canadian professional academic degree awarding system is being developed. In USA “Tuning” pilot program operates which is aimed at making some academic programs and qualification degrees in concord with European, thus making northern-American region attractive for European students:
Northern Africa and Middle East
Although the countries of this region are not official members of Bologna agreement they are closely related to this process and have active collaboration directed to integration EHEA. Particularly the target fields are harmonization of Bachelor’s and Master’s qualification degrees, quality assurance, student mobility, which are at the center of attention of European TEMPUS program.
So, Bologna process left its trajectory on overseas educational areas in two terms. On one hand, developing countries strive to portray the tools of that process and search ways of integrating EHEA. On the other hand, the countries having developed educational system, being leaders in provision of educational services and having rich traditions, not only do not reject Bologna principles, moreover, somehow applying them, they strive not to lose their competitive positions in globalizing educational market.
Armen Tshuguryan Nonna Khachatryan
Professor of Northern University, Armenia Assistant professor
Doctor of Economics of the Yerevan State University
E-mail: Jarmen1@mail.ru E:mail: nonka-j@yandex.ru
BOLOGNA PROCESS SOCIAL - ECONOMIC CONSEQUENCES
Key words: financing of higher education, economic consequences of educational reforms, job markets demands, Bologna process
ABSTRACT
In recent years its come necessary to discuss Bologna process issues not only education point of view, but also concerning to issues of economic outcomes. As a rule, in professional literature Bologna process is analyzed in terms of building a single European educational area leaving the comments of educational market global competitiveness in the shadow. The article is an attempt to represent Bologna process motives not only on the basis of educational, but also social economic motives.
The main and wide-ranging target of Bologna process is formation of European higher education area (EHEA), the necessity for which was observed two decades ago. However, Bologna process started not only on the basis of educational motives. The reasons were more thoughtful and troubling for Europe. [1]
First of all, common labor market in Europe is rapidly developing. Higher education specialists, freely moving within the territory of European Union, are given various estimates by employers of various countries. Therefore, now mutual recognition of diplomas awarded to graduates of European Universities and formation of mutual trust towards quality of education is considered to be very important, and it is possible to implement by forming a single educational area. Besides, within the territory of European Union not only graduates with higher education but also students and staff of Universities have started to participate in mobility. So preparation of the same specialists in different Universities and countries according to the unified educational standards has become a necessity and formation of European higher education area can significantly contribute to it. And finally, Europe's attractiveness and competitiveness in the fireld of educational services has also become a question of agenda. Currently provision of educational services is not only a major factor in formation of human capital, but also a business. Thus, according to the involvement of international students USA is considered to be a leader and ensures large inflows of educational fees from Europe as well. Therefore, in terms of competitiveness formation of European higher education area will be able to adequately respond to global challenges. Thus, the main motive of Bologna Process was not only the establishment of unified European educatioanal area, it also suggested political and economnic interests.
Higher educational services have a tendency to grow in price and it is conditioned not only by high inflation rates registed in the global economy. Nowdays the requirements of labor market made to specialists are rapidly changing and becoming more demanding and high quality. As a result, skills and competencies of University graduates, formed in the course of education, may ''get old'' from the very start of their work.
Naturally, professional educational services should resist competitive challenges of the labor market and spend more resources for the purpose of ensuring necessary quality of education. It is not accidental that during the last decade higher professional education in European higher education area education price has increased by 16 %. Moreover, education and science expenditure portion in GDP of European countries passes the 5% threshold. It is natural that in the formed situation European countries should take measures to increase the effectiveness of educational expences, and Bologna process tools significantly contribute to it.
Thus, the transfer of academic credits implies not only academic freedom, it has also an economic context. In case of mutual recognition and acceptance of credits from other educational establishments the University does not spend resources any more on teaching a similar module and makes savings of educational costs. Granting joint diplomas by different universities pursues the same goal, as the costs of educational services provided to graduates are effectively distributed between universities thereby reducing cost price of education. Large-scale application of ongoing education system also contributes to cost price reduction of educational services, especially in such cases when Universities accept academic credits from non-university structures thereby ''being liberated'' from teaching some modules.
However, in terms of forming economic results Bologna process application tools are more vividly displayed not from the perspective of increasing efficiency of forming educational services cost price but from that of regulating labor market and alleviating unempoloyment in Europe. Each corner of the common economic area formed within the framework of European Union should be available for free movement of the workforce. So, Universities will strive to prepare such specialists who will be able to find job and be demanded by employers of different countries.
According to the statistics, proportion of unemployment in groups with higher education has lower level as they have greater demand in labor market. (see table 1): So the main task of the University is preparing specialists meeting the requirements of globalizing economy.
If during the first years preceeding the launch of Bologna process the basic components ensuring its tools had been formed (quality assurance, academic credits accumulation and transfer, mutual recognition, education), leaving analysis of social consequences of the process on the background, then during London Communique a serious statement was made to promote all levels of higher education in the direction of social justice towards entering, studying and graduating students. It became clear that Bologna process could not run effectively, or it could even fail, if it would not have been based on social justice. For this purpose it was intended to take additional measures to organise students' education irrespective of their social and economic status, revealing flexible educational paths and providing educational services on an equal basis.
Table 1
Proportion of unemployed people in groups with different levels of education 2011(%)
Academic degree EU Italy France Czech Poland
Secondary 14.4 11.19 12.3 15.5 41.7
Vocational 9.5 8.8 15 6.6 25.4
Higher 10.2 12.3 9.8 5.3 16.1
Source: Key Data on Education in Europe, Eurostat 2012, page 186
In addition to all this, Bologna process social-economy dimension was clearly underlined during the conference in Leuven [4]. It was decided that students should reflect the diversity of population of Europe aimimg at achieving equal rights for quality education. It includes improvement of educational atmosphere, elimination of all obstacles and establishment of relevant economic conditions so that students can be provided educational services for all levels.
It was also mentioned that each country-participant should set measurable targets for overall involvement in educational programs and improvement of various groups’ participation indexes in all levels, it should also develop standards and mechanisms for periodic review. In addition, it was also suggested to increase the Universities’ responsibility for ensuring their graduates’ social perspectives (employment, career opportunities).
Table 2 Distribution of migrant and non-migrant students in Universities of EHEA countries (%)
EHEA countries Migrant students Non migrant students Total
Netherlands 40 60 100
Italy 35 65 100
Czech Republic 50 50 100
Portugal 45 55 100
Estonia 20 80 100
Armenia 0 100 100
Source: Key Data on Education in Europe, Eurostat 2012, page 186
Studies show that in EHEA countries the distrtibution of migrant and non-migrant students is not equal. In general, in all countries availability of higher education among migrants is significantly low. If in Netherlands, Czech Republic, Finland the ratio of migrant and non-migrant students is somehow equal, in Italy, Estonia there is a triple split emerging between them. Such distribution does not indicate social balance of students' admission in EAHA Universities. (see table 2):
Table 3 The ratio of Bachelor students paying for education in 2010/2011 academic year(%)
Denmark 2
Finland 3
Sweden 1
Malta 12
Austria 18
Armenia 72
Poland 53
Latvia 62
Italy 91
France 79
Portugal 95
Source: The European Higher Education Area in 2012: Bologna Process Implementation Report,
page 95, http://eacea.ec.europa.eu/education/eurydice
Furthermore, applicants’ admission to Universities in a several countries of EHEA is conditioned by availability of higher education of their parents. The degree of connectivity between parents’ qualification and number of applicants is especially high in Slovakia, Romania, and Bulgaria, where parents’ psychological and economic support is great. [2]
Naturally, economic and psychological influence conditioned by parents' educational qualification hinders provision of Bologna process social equability which is vividly manifested in RA. Today in Universities of Armenia the number of applicants from the region is gradually decreasing because of their domestic social-economic situation.
Paid education is an obstacle for Bologna process social equability. Studies show that in countries of EHEA this issue have different solutions. So, if in Scandinavian countries Bachelor's studies are almost for free, in France which is also a developed country the majority of Bachelor students study in paid system. (see table 3):
Table 4
Dynamics of paid and state-funded places in Bachelor's educational system
in state universities of Armenia
Systems 2010/2011 2011/2012 2012/2013
State-funded 23% 26% 21%
Paid system 78% 74% 79%
100% 100% 100%
Source: Armenian statistical yearbook, www.armstat.am
For comparison it should be mentioned that in Armenia all educational programs for Bachelor's studies are for paid, where state-funded system ranges from 32% to 35%. (see table 4). Particularly, applicants coming from regions cannot afford themselves studying on paid-system, thus higher education in our Republic is gradually becoming “elite'' which undermines the grounds of Bologna process social dimension.
Concerning to this, the one of purposes Bologna process targets is financing higher educational mainly by public recourses, which is making warrantable conditions for university stabile development [3]. According of comparable analyzing, the governmental participation in higher education and research framework is different in EHEA. As a result, in Western Europe region the public portion of tertiary education and science financing in pre crisis period was higher (2%) in Norway and Denmark, and lower in Slovakia (0.7%), when the average of this indicator was 1.15% (see chart 1). At the same time, in Armenia public expenses of education is higher for secondary schools (see table 5), but tertiary education is mainly financing from privet sources, `particularly by students education fees (see table 4).
Chart 1 Proportion expenses of higher education and research in public finance framework (%)
Source: Key Data on Education in Europe, Eurostat 2012, page 99
Table 5
The tendency of educational expenses in structure of the state budget RA
Years
Indicators 2008Ã. 2009Ã. 2010Ã. 2011Ã.
Total expenses (mln AMD) 810574.5 929108.6 954316.5 986509.2
Education (mln AMD) 103530.8 107529 97790.1 106085.0
Proportion (%) 12.74 11.58 10.25 10.75
Source: Armenian statistical yearbook, 2012, page 385, www.armstat.am
Conclusion
Bologna process is not only higher education service provided oriented progression, but also capability for improving economic and social conditions of graduating students [5]. Although, this process is existing more 10 years, still there are problems in employability and social dimensions for educated people not only in Europe, but also in Armenia. The higher the level of education, the lower the unemployment ratio among young people is. However, on average around one fifth of young people with higher education qualifications are employed in jobs not usually requiring a higher education qualification. While obtaining a tertiary qualification improves the employability of young people in most countries, recent graduates face difficulties in the labor market. This conclusion again highlights problems concerning the evaluation of higher education institutions' performance based on unemployment indicators.
REFERENCES
1. Yeritsyan S., Tshuguryan A ., 100 questions and answers about Bologna process Yerevan,
“Edit print”, 2007, page 6
2. Eurostat, LFS ad-hoc module 2009, pages 14-15
3. David Crosier , Teodora ParvevaThe Bologna Process: Its impact on higher education development in
Europe and beyond, Paris 2013 UNESCO: International Institute for Educational Planning pages 27-28
4. Communiqué of the Conference of European Ministers Responsible for Higher Education,
Leuven and Louvain-la-Neuve, 28-29 April 2009
5. Bologna Policy Forum Statement Vienna, March 12, 2010, page 1
Джугурян Армен Геворкович
проф.,Северного университета,
доктор экономических наук
Хачатрян Нонна Николаевна
доцент Еревнаского государственного университета,
кандитат экономических наук
СОЦИАЛЬНО – ЭКОНОМИЧЕСКИЕ ПОСЛЕДСТВИЯ БОЛОНСКОГО ПРОЦЕССА
Ключевые слова: финансирование высшего образования, экономические последствия
образовательных реформ, спрос рынка труда, Болонский процесс
Болонский процесс изначально был ориентирован на образовательные реформы в системе профессионального обучения. Однако реформы в системе высшего образования, наряду с совершенствованием менеджмента в процессе оказания образовательных услуг, приводят также и социально-экономические результаты. В частности, изменяются пропорции долей финансирования на высшее образование и научно-исследовательские работы из средств государственного и частного сектора. Также, происходят качественные изменения в сотрудничестве работодателей и университетов, поскольку образовательные реформы нацелены на удовлетворение потребностей рынка труда. В статье приводятся сравнительный анализ социально-экономических последствий Болонского процесса в странах европейского пространства высшего образования (ЕПВО) и на этой основе оцениваются результаты реформ высшего образования в республике Армения.
Armen G. Juguryan
Prof. of Northen University of Armenia
Anahit Basenchyan
Expert of taxation, SRC of RA
THE SHADOW ECONOMY REDUCTION ISSUES IN ARMENIA
A second reason for concern is that when the shadow economy grows, economic policy is based on erroneous official indicators, such as unemployment, official labor force, income, and consumption. In such a situation a prospering shadow economy may cause the government severe difficulties, because it provides unreliable official indicators. The very direction of intended policy measures may therefore be questionable. A third reason for concern is that the rise of the underground economy can be seen as a reaction by individuals who feel overburdened by state activities, such as high taxes and an increasing number of regulations.
Finally, a growing shadow economy may offer strong incentives to attract workers, both domestic and foreign. These workers would then contribute less within the official economy. These growing concerns have led many economists to the challenging and difficult task of measuring the size and development of the shadow economy, to trace back its main causes, and to analyze the interactions of the official and unofficial.
Countries that are transitioning from one economic state to another (transition countries) and developing countries have claimed that a large part of economic activities were done within the shadow economy. In applying the estimation techniques for measuring shadow economy for the period 1995–2010, the results indicated the size of shadow activities to be 35–44% of GDP for developing economies, 21–30% of GDP for the countries transiting from communist to capitalist economy (transition economies) and 14–16% of GDP for the Organisation for Economic Co-operation and Development (OECD) economies. The value of the shadow economy grew from about 7.9% of GDP in 1976 to about 16% in 2011.
The shadow economy was considered by many studies to inhibit development in developing countries and to have eroded the existing welfare state in the developed countries. Underground economies also have a significant long-term negative effect on the generation of societal wealth.
Undoubtedly, most policy actions that strengthen economic growth of the official economy will have an effect of encouraging businesses to move out of the shadow economy. The question is whether, in addition to these, there are actions policymakers could pursue whose main purpose would be to frankly influence the size of the underground economy.
The following are some of the several types of acti¬ons that may be considered by policymakers from many nations in this regard: encourage dynamic tax system, promote institutional strengthening, initiate better enumera¬tion, promote banking privatization, discourage activities that will promote market exit, enhancement of the rule of law, incentives for transformation of shadow economy into formality should be enhanced, and lastly, demand-side public policy approaches to shadow economic activities.
Figure 1 Percentage of shadow economy in GDP
The lasted world economic and financial crisis of the past three years – and particularly the more recent confuse in the western countries sovereign debt markets – has aroused new concerns about underground economic activity. “Black” workers pay no taxes, reducing government income and increasing budget deficits, which can prompt higher taxes to make up for lost revenue, which in turn tempts more people into the black economy – a vicious circle of rising crime and decreasing government legitimacy.
For example, in Spain, where police have sometimes raided illegal Chinese clothing workshops but where much of the black economy takes the form of humdrum tax evasion by its own citizens – illustrates the complexity of a phenomenon that has spawned its own branch of economic research. The size of the Spanish black economy is equivalent to 19.2 per cent of official gross domestic product. That happens to be the same proportion as the average he calculates for 31 European countries, with Bulgaria the highest at 32.6 per cent and Switzerland the lowest at 8.1 per cent (see figure 1).
There is considerable agreement internationally, on both theoretical and empirical grounds, about the factors that determine the relative size of the shadow economy. Most of the literature on the informal economies in the past has focused on industrialised countries. In general, the findings pointed to an increasing share of the informal economies in the industrialised countries, supposedly due to increasing taxes and regulations during most of the post war period.
A lack of estimations of the activities of shadow economy has limited and continues to limit time series analysis of the impacts of shadow economic activities to a small set of countries. For policy makers, information on the size of the informal economy and its possible consequences is of considerable importance. For example, in some industrialised countries the observed trend towards ever increasing unemployment rates could be due to an increasing number of people working in the shadow economy.
If this were the case, conventional employment policies cannot be expected to increase measured employment in the formal sector or at least not in the same way as would be the case without people working in the clandestine economy. Or, if the size of the underground economy is related to overall tax rates, tax increases may not have the expected results, but only increase the size of the informal economy and so reduce the tax base and tax receipts. In countries or regions with a large informal sector the effective management of the economy by the state may be undermined.
A second way to assess the consequences of the informal sector is to compare an economy that has a large informal sector with one of the same overall size, but where the shadow economy is smaller. In many respects, a large informal economy is not beneficial for economic growth when compared with a situation where the shadow economy is formalised. For example, while people working in the hidden economy benefit from public infrastructure, such as streets; they do not contribute to its financing. Therefore, reducing the size of the unofficial sector could lead to a broader tax base and thus open up the possibility of lowering overall tax rates or improving public services; both may be considered positive outcomes that could improve the growth prospects of the economy in question.
Although the international experience and the academic literature suggest that the main reason for the existence of the shadow economy are high rates of taxes and other mandatory payments imposed by the government, however, in Armenia these have not been the only major factor contributing to the existence of shadow economy. Of course being in an underground is supposed to limit the businesses’ access to and rights for some benefits, such as bank credits and public goods, in the form of rule of law, and other benefits. However, in the Armenian reality these benefits have not material, because of the underdeveloped and ineffective systems of provision of such public goods, as well as the relationship based crediting widely practiced by comer¬cial banks.
The other major factor that has contributed to the existence of the shadow sector in Armenia is the widespread politicization of many businesses. Today, many public officials have stakes in or effectively own various businesses, and by using their role and position in the public sector they create favorable conditions for those economic entities. There is also the reverse trend of getting public offices using the economic wealth accumulated by engaging mostly in shadow activities.
The second group of shadow economy involves illegal activities. It should be realized that taxes and mandatory payments are not the major reason for existence of some types of shadow activities. Even if there were no any taxes or regulations there would still be some part of economic activities, mostly illegal ones, which would have not been captured by the official statistics. Some of the economic agents and citizens are involved in production or trade of such products and services that are prohibited by laws and various.
There are some economic activities that are not being captured because of the underdeveloped systems of national statistics, as well as low and ineffective information sharing between various state bodies, such as national statistical service, tax, customs, state pension fund and others. Better coordination and information sharing would limit the chances of leaving some economic transactions from national accounts. While this problem was very serious in the early stages of transition, however, today the national statistical service is quite developed and these unrecorded economic activities does not constitute a major part in the total shadow economy of Armenia (see table 1).
Table 1
Estimated Level of Underground Economy of Armenia by Sectors
Percentage
Industry 28.7
Construction 46.1
Transport and communication 21.1
Trade 75.5
Agriculture 21.0
Other Branches 27.1
GDP at market prices 28.9
The forth group of formation in Armenia shadow economy includes those activities, that are carried out using household activities and barter transactions. Some parts of the total economic activities are not included in the official statistics because of difficulties of their measurement and/or ineffective and underdeveloped mechanisms and tools used by the statistical service for collection of relevant information from all sectors of the economy.
Although the concept of the gross national income suggests that the national accounts should involve all economic activities of the society, however the most of the values created by households are not measured and accounted in the national statistics. Although these activities that are sometimes also illegal (like production and sale of homemade products, readjustments and reconstruction of apartments using relatives’ and neighbors’ labor and without any approval from relevant regulatory bodies and others), however they create economic values by using scarce economic resources taken from the official part of the economy. The main reason for not recording these types of activities in the official statistics relates to the measurement problem, as well as the fact that this issue has not been a major development problem for the Armenian authorities mostly because of the limited policy implications that it has and the existence of other more important areas for the government to focus on. The problematic aspect of this issue is the tendency of various households to grow and carry out such regular economic activities already on a paid basis. In this case, these activities that we categorized as unrecorded become non-reported hidden economic activities that are subject to full taxation. Some of the economic activities are also left out of official statistics because of underdeveloped systems of national statistical data collection.
Barter transactions are also left unrecorded in any official agency and statistics. This type of activities especially involving various agricultural products have been very popular particularly in the regions of Armenia. However, as it was with the unrecorded economic activities, barter transactions are very difficult to measure and they do not constitute a major policy issue to be much concerned with at this stage of Armenia’s development.
The first conclusion is that shadow economies are a complex phenomenon present to an important extent in all type of economies (here transition countries). People engage in shadow economic activity for a variety of reasons, among the most important of which we can count are government actions, most notably, taxation and regulation. With these conclusion goes a second, no less important one: a government aiming to decrease shadow economic activity has to first and foremost analyze the complex relationships between the official and shadow economy – and even more important – among consequences of its own policy decisions.
Literature:
1. Tunyan, B. “Shadow Economy of Armenia and the Ways of Reducing Its Size”, Dissertation, Armenia, 2000.
2. Basenchyan A., The shadow economy formation stages in Armenia, // Russian Federation and Republic of Armenia economies during world economy crisis: issues and development prospective, ASEU, Yerevan, 2010, pp. 417-422
3. Feldmann, H., 2009, ―The Unemployment Effects of Labor Regulation Around the World,‖ Journal of Comparative Economics, Vol. 37 (1), pp. 76-90
4. Davoodi, H., and D. Grigorian, 2007, ―Tax Potentional Versus Tax Effort: A Cross-Country Analysis of Armenia’s Stubborunly Low Tax Collection, ―IMF Working Paper 07/106 (Washington: International Monetary Fund), pp. 125-129
5. Schneider, F., and D. Enste, 2000, ―Shadow Economies: Size, Causes, and Consequences,‖ Journal of Economic Literature, Vol. 38, pp. 77-114.
ՍՏՎԵՐԱՅԻՆ ՏՆՏԵՍՈՒԹՅԱՆ ԿՐՃԱՏՄԱՆ ՀԻՄՆԱԽՆԴԻՐՆԵՐԸ ՀԱՅԱՍՏԱՆՈՒՄ
Արմեն Ճուղուրյան
Հյուսիսային համալսարանի պրոֆեսոր
Անահիտ Բասենցյան
Հարկային ոլորտի մասնագետ, ՀՀ ՊԵԿ
Ներկայացված են ստվերային տնտեսության ձևավոր¬ման նա¬խա¬դրյալները և դրանց կանխարգելման ուղիները: Կա¬տարվել է ստվերային եկամուտների ձևավորման համեմա¬տա¬կան վերլու¬ծություն ըստ տարածաշրջանային երկրների և դրա հիման վրա ներկայացվել են առաջարկներ` Հայաստանի Հան¬րա¬¬¬պետու¬թյու¬նում ստվերային եկամուտների կրճատման ուղ¬ղու¬թյամբ:
No comments:
Post a Comment