The Armenian government announced on Thursday plans to substantially cut a key tax levied from small businesses, citing the need to stimulate economic activity in the country.
A package of legal amendments drafted by the government would reduce from 3.5 percent to 1 percent the rate of turnover tax paid by trading firms with annual sales of up to 58.3 million drams ($140,000). It would also introduce the status of “family business” for entities whose annual turnover does not exceed 12 million drams.
Introduced by the previous government in January 2013, turnover tax replaced profit and value-added taxes paid by small businesses engaged in retail or wholesale trade. It was meant to facilitate their growth.
Prime Minister Hovik Abrahamian said the tax cut, which the Armenian parliament will almost certainly be approved next week, will give a major boost those businesses. He said the government plans to make up for the resulting loss in tax revenue with more taxes collected from large companies.
“According to preliminary estimates, our budgetary revenue will drop by 8 billion drams,” Abrahamian said at a weekly cabinet meeting in Yerevan. “While giving these privileges to small and medium-sized companies, we will try to bring bigger ones into the taxation field. The Finance Ministry must be very consistent here.”
Last month Abrahamian’s cabinet gave large companies until July 1 to stop evading taxes and abusing their market positions or face a tougher crackdown by tax authorities. It set the deadline after the premier met with more than 100 wealthy entrepreneurs.