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Government Defends Higher Income Tax Rates


Armenia - The Prime Minister's Office and Finance Ministry buildings in Yerevan, 30Sep2017.

The Armenian government’s controversial decision to change personal income tax rates will place a heavier financial burden only on high-income individuals, a senior official in Yerevan insisted on Tuesday.

Armenia’s new Tax Code which came into effect this month introduced, among other things, more progressive income tax rates. In particular, the code raised from 26 percent to 28 percent the tax rate for monthly incomes ranging from 150,000 to 2 million drams ($310-$4,150). It is set at 36 percent for those Armenians who earn more.

The 800-page legislation praised by the International Monetary Fund at the same time cut the tax rate from 24.4 percent to 23 percent for workers making less than 150,000 drams a month.

Armine Matosian, a senior official from the Armenian Ministry of Labor and Social Affairs, emphasized this fact as she defended the code in an interview with RFE/RL’s Armenian service (Azatutyun.am). She insisted that Armenians making between 150,000 and 280,000 drams will also pay less taxes because of a complex method of income calculation.

“If I, for example, get a monthly salary of 300,000 drams, 150,000 drams of it will now be taxed at a 23 percent rate and the remaining 150,000 drams at 28 percent,” explained Matosian. This means, she said, that only those people whose wages or incomes exceed 280,000 drams will have to pay more.

The average monthly wage in Armenia stood at almost 188,000 drams ($390) as of November 2017, official statistics show.

The Tax Code was passed by the Armenian parliament in 2016 amid strong criticism from the opposition and even some pro-government lawmakers. They said that the higher tax rates will encourage more private employers to underreport their workers’ wages. They also criticized other provisions of code, including higher excise duties on fuel, alcohol and tobacco.

IMF officials backed, however, government arguments that the new legislation will improve tax administration and allow a badly needed increase in public spending.

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