By Karine Kalantarian and Lilit Harutiunian
The Armenian parliament opened debates Tuesday on a controversial package of government-drafted amendments to tax legislation that have sparked angry protests from many small traders.
Hundreds of them demonstrated outside the National Assembly building in Yerevan against the proposed changes which are part of a broader government program to tackle widespread tax evasion.
The three-year program was approved by Prime Minister Tigran Sarkisian’s cabinet earlier this month. It envisages a series of administrative and legislative measures which officials say will address both tax fraud and arbitrary actions of tax authorities. Sarkisian said the reform will primarily target large companies suspected of grossly underreporting their earnings and result in an “environment of soft tax administration” for small and medium-sized businesses.
However, it is small business that is the main target of the government’s draft amendments to Armenia’s Customs Code and a dozen other laws regulating taxation that were put to parliament debate. In particular, the legislative package calls for the abolition of so-called “simplified tax” that has exempted small firms and individual traders from payment of value-added tax (VAT) and other hefty duties levied from larger companies.
As a consequence, thousands of traders selling non-agricultural products in 370 or so marketplaces across Armenia would have input their transactions in cash registers used for calculating the amount of VAT and profit tax paid to the state. They have until now paid a single fixed tax depending on the size and location of their commercial space.
Addressing the National Assembly, the deputy chief of the State Tax Service (STS), Aharon Chilingarian, said the measure would only hit hard a relatively small number of wholesale traders who he said have been grossly evading taxes. He said “only two or three” markets could shut down as a result.
The traders who gathered outside the parliament building thought otherwise. “I stand on the street in the winter cold and the summer heat to make only 2,000 to 3,000 drams ($7-$10) a day,” said one man. “I have two small children. If they approve the changes, I will personally smash my cash register in public.”
“Instead of imposing more taxes on us, the authorities should open new factories so we can work there,” said another protester.
The proposed changes were also condemned by the opposition minority in parliament and the country’s biggest opposition force led by Levon Ter-Petrosian. In a statement on Monday, Ter-Petrosian’s Armenian National Congress (HAK) said the government’s stated crackdown on tax evasion should have started from de facto economic monopolies owned by government-connected “oligarchs.” They have long been suspected of large-scale tax fraud.
Representatives of the protesting traders were allowed into the parliament building later in the day to discuss the matter with Chilingarian and other senior STS officials. The heated discussion seemed to yield no agreement, with both sides sticking to their guns. The National Assembly, which is dominated by government loyalists, will continue the debates on Wednesday.