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Armenia Scraps Car Tax After Eurasian Union Warning


Russia -- A view of the AvtoVAZ car plant in Togliatti, December 15, 2015

Russia -- A view of the AvtoVAZ car plant in Togliatti, December 15, 2015

The National Assembly unanimously passed on Wednesday a government bill abolishing a 20 percent tax levied from cars imported to Armenia from Russia and other members of the Eurasian Economic Union (EEU).

Prime Minister Hovik Abrahamian’s cabinet drafted corresponding amendments to an Armenian law on value-added tax (VAT) late last month following a warning issued by the Russian-led bloc’s executive body, the Eurasian Economic Commission.

A senior commission official, Tatyana Valovaya, said on February 8 that Armenia should have exempted such cars from VAT when it formally joined the EEU in January 2015. She cited common trade rules set by the bloc.

Subsequent reports in the Armenian press said that Yerevan is reluctant to scrap the tax because that would lose it millions of dollars in annual state revenue.

Armenian companies and private individuals importing cars from EEU member states have until now been exempt only from a 10 percent import duty. The Armenian customs service has collected not only VAT but also an environmental tax from second-hand cars manufactured 5 or more years ago.

Presenting the bill to fellow lawmakers, Vartan Ayvazian, the chairman of an Armenian parliament committee on economic affairs, made clear that it will have no retroactive effect. This means, he explained, that the government will not have to return proceeds from VAT collected from EEU car imports last year.

Some critics of the Armenian government have demanded in recent weeks that the government compensate those importers for what they consider illegal taxation.

The European Union and the United States have long accounted for the vast majority of Armenian car imports.

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