Prime Minister Hovik Abrahamian discussed with other senior officials on Tuesday possible changes in Armenia’s new Tax Code which his government pushed through parliament in June over strong objections voiced by the opposition and some business leaders.
The code passed by the National Assembly in the first reading will replace all other Armenian tax laws that have been enforced until now. It is meant to streamline taxation procedures and complicate tax evasion in the country.
The 700-page legislation also calls for higher taxes on fuel, alcohol and tobacco and a lower income ceiling for small businesses paying a single “turnover tax.” More importantly, it increases income taxes levied from workers earning between 120,000 and 2 million drams ($250-$4,150) per month.
These provisions were criticized not only by opposition but also some pro-government lawmakers when the code was debated by the Armenian parliament. Several Armenian business associations publicly added their voice to the criticism, saying that higher taxes would seriously hurt many businesses.
By contrast, the International Monetary Fund has defended the new tax rates sought by the government. A senior IMF official said later in June that the code will pave the way for a badly needed increase in public spending and improve tax administration in Armenia.
Still, Abrahamian promised during the heated parliamentary debates that the government will consider “reasonable” amendments to the Tax Code before it is passed in the final reading in September.
Abrahamian chaired on Tuesday a meeting on the issue with Deputy Prime Minister Vache Gabrielian, Economy Minister Artsvik Minasian and senior tax officials. A statement by his press office said they looked into “numerous proposals” submitted by lawmakers, business groups as well as unnamed “international structures.”
The statement cited Abrahamian as saying that those proposals should be “analyzed in detail” before the final parliament debates on the code. He said the government is ready to accept those draft amendments that would make Armenia’s business environment more “transparent and competitive” and render the country more attractive to investors.
The Armenian government’s tax revenue has increased considerably in the past several years. But it is still equivalent to only one-fifth of Gross Domestic Product, a low figure even by ex-Soviet standards. The modest ratio results, in large measure, from widespread tax evasion, corruption and privileged treatment of entrepreneurs linked to the government.
The IMF and the World Bank have long pressed the authorities in Yerevan to improve tax collection.