The Armenian government announced on Wednesday plans to sharply increase the presently modest taxes collected from homeowners.
A bill approved by Prime Minister Nikol Pashinian’s cabinet calls for particularly drastic increases in property taxes paid by rich or affluent Armenians.
“Today, there are luxury villas which, for example, pay 800,000 drams [in property tax] each year,” said Pashinian. “They will have to pay 15 million drams after we change the law. It’s obvious that for such homeowners 15 million drams is not a big deal.”
According to the International Monetary Fund, proceeds from these taxes are currently equivalent to just 0.2 percent of Armenia’s Gross Domestic Product, a very low proportion not only by Western but also ex-Soviet standards.
The government expects to significantly increase them without changing the existing progressive tax rates ranging from 0.05 percent to 1 percent. It wants to change instead the methodology of calculating the value of properties, which is currently based on their cadastral valuation by a government agency. Under the government bill, the Cadaster Committee would determine it on the basis of their market value.
The head of the committee, Suren Tovmasian, said that to his the agency will launch an electronic database that will enable every homeowner to see the price of their property and the calculated amount of their tax obligations.
The bill would introduce a complex progressive scale of taxation. For example, the owners of small apartments worth an estimated 23 million drams ($48,000) would pay 18,000 drams, while ownership of larger properties that cost 58 million drams would translate into 108,000 drams in annual taxes.
Tax authorities would levy at least 326,000 drams from luxury apartments worth 100 million drams or more. The owners of large and expensive houses would have to pay even more.
Finance Minister Atom Janjughazian estimated that Armenia’s property tax revenue, most of it directly channeled into local community budgets, would more than quadruple as a result. He said local communities would therefore be the main beneficiaries of the bill approved by the government.
The government was quick to send the bill to the Armenian parliament for urgent debate. If passed, the proposed changes to the national tax legislation would be introduced gradually over the next three years.