In an effort to attract more foreign investment, the Armenian government unveiled on Thursday a bill that would all but exempt large-scale exporters from the country’s 20 percent corporate profit tax.
The bill approved during a weekly cabinet meeting chaired by Prime Minister Hovik Abrahamian sets a profit tax rate of just 2 percent for manufacturing companies exporting at least 50 billion drams ($106 million) worth of goods other than metals and ores annually. Officials said it will be sent to the Armenian parliament dominated by government loyalists in the next few days.
“This is one of the unconventional government steps aimed at stimulating exports,” Abrahamian told ministers. He said greater exports would mean more jobs and other tax revenue.
According to the National Statistical Service (NSS), Armenian exports rose by 2.7 percent in January-November 2014 to almost $1.4 billion drams. Copper, other base metals and ore concentrates accounted for 45 percent of the export revenue. The proposed tax break will not apply to the companies manufacturing them.
Deputy Finance Minister Vakhtang Mirumian, who submitted the bill to the government for approval, said that no company involved in the other sectors of Armenia’s economy boasts exports worth 50 billion drams or more at present. “This [tax privilege] is primarily geared towards foreign investors that would come to Armenia, invest here and export their products,” he told reporters.
Mirumian said the government is now holding “tentative negotiations” with some potential investors. But he declined to name them or give other details.
Over the past year, President Serzh Sarkisian has repeatedly urged foreign investors to take advantage of Armenia’s accession to the Russian-led Eurasian Economic Union (EEU). He has argued that manufacturing firms set up by them would have tariff-free access to the Russian market.
Raffi Mkhjian, a businessman heading the Armenian Union of Exporters, questioned the wisdom of the tax break initiated by the government. Mkhjian said the government should mainly focus on small and medium-sized enterprises (SMEs) in its efforts to boost exports. “It’s SMEs that can save us today,” he told RFE/RL’s Armenian service (Azatutyun.am).