By Atom Markarian
Wealthy Armenians will have to pay substantially higher taxes for their expensive houses and cars under proposals approved by the government on Thursday.
A bill approved by ministers sets the minimum tax rate of 1.2 percent for real property worth more than 30 million drams ($52,000). It introduces a progressive taxation scale for houses falling under that category.
The existing legislation levies a flat 0.8 percent rate from the owners of houses and apartments with the market value of at least 3 million drams.
The government will hold further discussions over the next week to ascertain new legal mechanisms for property valuation, which will be vital for the successful enforcement of the new measures.
Another draft law that will be sent to the parliament soon envisages an even higher surge in taxes on Western-made luxury cars. Despite persisting widespread poverty, their number has grown steadily in recent years -- a stark symbol of the huge income disparity in Armenia.
Under the existing law, private vehicles are taxed on the basis of their age and engine power. A bill drafted by the ministry for state revenues would introduce additional taxes for expensive cars which very few Armenians can afford to buy. Officials estimate that their owners will have to pay at least twice more in taxes if the government pushes the proposed changes through the parliament.
The idea of drastically increasing taxes on luxury goods was strongly advocated last December by President Robert Kocharian’s chief economic adviser. In an interview with RFE/RL, Vahram Nercissiantz said that would be one of the ways of ensuring a “more just” distribution of incomes among all segments of the population. Nercissiantz argued that several consecutive years of economic growth have mainly benefited the rich.
But the proposed measures alone would hardly have a substantial impact on the extremely low level of the government’s tax revenues. According to Deputy Minister of Finance and Economy Tigran Khachatrian, they will generate only 450 million drams ($780,000) in extra revenues this year.
Under Armenian law property taxes go directly to the budgets of local governments.