Importers of these products currently pay only fixed taxes pegged to the physical volume of their deliveries. By contrast, local tobacco and alcohol manufacturers are subject to regular taxation that covers all businesses operating in Armenia. That includes payment of value-added and excise taxes, which appears to give them some competitive edge over their importing competitors.
Under a package of amendments to several Armenian laws passed by the National Assembly in the first reading, the same taxes will be levied from petrol and vodka starting from next January. The government decided to exempt diesel fuel from value-added tax on the grounds that it is widely used by farmers owning tractors and other diesel-powered agricultural equipment.
Cigarette imports will fall under regular taxation from January 2014. Deputy Finance Minister Suren Karayan said the existing fixed duties for foreign-made cigarettes will be raised before their abolition.
The opposition minority in the Armenian parliament rejected the changes as a blow to local tobacco and alcohol firms. “In effect, our manufacturers, which create jobs and pay wages, are equated with importers and the country is becoming more import-oriented,” said Artsvik Minasian, a parliament deputy from the Armenian Revolutionary Federation (Dashnaktsutyun).
According to the government, Armenia has to ensure equal taxation for all imported and domestically manufactured products in accordance with its obligations to the World Trade Organization and other international bodies. Officials said on Wednesday that the International Monetary Fund has also pressed for the changes.
Opposition parliamentarians claimed that Yerevan has mainly faced pressure from Russia and Ukraine, leading importers of vodka and alcohol to Armenia. Ukraine recently complained lodged a complaint against Armenia with the WTO.