The National Assembly voted down on Friday an opposition bill that would reverse recent increases in personal income and fuel taxes initiated by the Armenian government.
The opposition Yelk alliance, which drafted the bill, has been particularly critical of higher excise duties on fuel that came into force on January 1. It blames them for recent weeks’ sizable rises in fuel prices in Armenia. It also says that the higher income tax rates will hurt the middle class hard.
Presenting the bill to fellow lawmakers, Yelk’s Nikol Pashinian said that a repeal of the new tax rates would mitigate the impact on the population of the increased cost of fuel and some basic foodstuffs. “Otherwise the social crisis in our country will deepen further,” Pashinian said during a three-hour parliament debate.
The government spoke out against the Yelk bill even before it reached the parliament floor. It insisted last week that the impact of the higher tax rates on consumer price inflation has been minimal.
Speaking in the parliament, Deputy Finance Minister Davit Ananian said that the higher fuel taxes had to be introduced to make up for what he called a loss of state revenue resulting from government efforts to improve tax administration and Armenia’s broader business environment. Ananian also said that the proposed tax cuts, if passed by the parliament, would result in a revenue shortfall of 32 billion drams ($66 million).
Khosrov Harutiunian, the pro-government chairman of the parliament committee on economic issues, also criticized the Yelk bill before the National Assembly voted to reject it.
Yelk put forward the bill after holding two demonstrations in Yerevan to protest against the price hikes. The rallies attracted only several hundred people.
The recent amendments to Armenia’s Tax Code criticized by Yelk raised from 26 percent to 28 percent the tax rate for monthly incomes ranging from 150,000 to 2 million drams ($310-$4,150). The rate for those earning more was set at 36 percent. The amended code 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.
Government officials insist that the more progressive tax will put a heavier financial burden only on high-income individuals. They argue that 90 percent of employed Armenians, who make between 150,000 and 280,000 drams, will not have any additional sums deducted from their wages because of a complex method of income calculation. And those who earn from 280,000 to 330,000 drams will pay an extra amount of only up to 820 drams ($1.7) a month, they say.