The Armenian government faced strong criticism from many lawmakers on Monday as they debated its new draft Tax Code envisaging higher taxes on relatively well-paid workers.
The government is keen to push the 700-page code through the National Assembly as part its declared efforts to improve tax collection and boost state revenue, which has long accounted for a modest share of Gross Domestic Product.
The International Monetary Fund praised in November the initial version of the legislation. “The new tax code provides an opportunity to broaden the tax base by eliminating exemptions and addressing gaps and thereby to support both consolidation and increases in growth-enhancing spending,” the IMF’s deputy managing director, Mitsuhiro Furusawa, said at the time.
The code caused controversy in Armenia, however, after it emerged earlier this year that it would raise the income tax rates for workers earning 120,000 drams ($250) or more per month. They would increase the rates from 26 percent to between 28 percent and 33 percent.
By contrast, the government wants to lower the tax rate for those earning at least 2 million drams from 36 percent to 33 percent. It is also seeking a modest tax cut -- from 24.4 percent to 23 percent -- for workers paid up to 120,000 drams per month.
Armenia’s official monthly wage currently stands at almost 187,000 drams ($390), suggesting that many, if not most, workers and their employers would have to pay more taxes. Critics say that this would only encourage tax evasion among them.
“Do you aim to destroy the middle class?” Levon Zurabian, an opposition deputy, said at the start of parliament debates on the proposed Tax Code.
The code also prompted criticism from some pro-government lawmakers. One of them, Hakob Hakobian, said the government failed to consult with businesspeople before drafting the controversial legislation.
“This bill wouldn’t benefit us,” said Hakobian. “It would only cause damage.”
The government was also criticized for seeking to tax stock dividends. Hrant Bagratian, an opposition parliamentarian, claimed that only rich states can afford such a tax. He also said it amounts to “double taxation.”
Vakhtang Mirumian, a deputy head of the State Revenue Committee who presented the bill to the National Assembly, rejected Bagratian’s claims.