By Tatevik Lazarian
The vast majority of Armenian farmers will remain exempt from value-added tax (VAT) for agricultural products that was introduced this year in line with the country’s commitments to the World Trade Organization (WTO), government officials said on Monday.
The 20 percent tax, until now levied from sales of all non-agricultural goods, has long accounted for most of the Armenian government's’ tax revenues. The government pledged to extend it to the agricultural sector when it was admitted to the WTO in February 2003 after a decade of membership talks with its more than 140 member states.
The government assured Armenians living in rural areas at the time that few of them will have to pay VAT in the foreseeable future. The country’s rural population largely consists of subsistence farmers struggling to eke out a modest living despite paying only a separate land tax.
In 2006, the government of then President Robert Kocharian announced that VAT will not be paid by farmers whose annual turnover does not exceed 8 million drams when it is introduced in January 2009. The threshold was subsequently raised to 58.4 million drams ($190,000).
According to Armen Alaverdian, deputy head of the State Revenue Committee (SRC), this means that only several hundred of some 340,000 individual farmers and agricultural firms will have their domestic sales taxed. “In essence the agriculture sector, excluding large agribusiness firms, will continue to be taxed in the same way,” he said.
Alaverdian seemed confident that the application of VAT will not push up the prices of domestic agricultural products. “I am convinced that prices won’t go up,” he told a joint news conference with Deputy Agriculture Minister Samvel Avetisian.
Avetisian, for his part, said it will be logistically very difficult for Armenian agribusiness firms will split up to post a lower their turnover and thereby avoid VAT. “I don’t think that, say, a large poultry farm, would find it beneficial to divide into smaller entities,” he said.