The compensations are financed from a special fund to which every working Armenian contributed 1,000 drams ($2) a month until this year. The recent war with Azerbaijan drastically increased the number of people covered by the scheme, forcing the Armenian government to boost the fund’s revenues accordingly.
A government bill passed by the parliament late last month significantly raised and diversified the fixed tax. Public and private sector employees now have pay from 1,500 drams to 15,000 drams depending on their monthly wages.
They are divided into five income brackets that determine the amount of their monthly contributions to the insurance fund. The minimum sum is levied from people earning up to 100,000 drams a month, compared with 3,000 drams set for wages ranging from 101,000 to 200,000 drams. People making 1 million drams or more will pay the highest tax.
The two parliament deputies representing the ruling My Step bloc consider the quasi-progressive tax unfair, saying that high earners contribute a much lower share of their incomes to the fund than other taxpayers. A bill drafted by them would lower the tax rates for people making between 100,000 and 750,000 drams.
The bill also calls for two new tax brackets for wages ranging from 750,000 to 1.5 million drams and even higher incomes. Their earners would pay 15,000 and 20,000 drams respectively.
“The sums contributed to the insurance fund would account for 1 percent to 2 percent of wages earned by various categories of people, compared with the [tax rates of] 0.85 percent to 3 percent set by the current law,” one of the lawmakers, Gevorg Papoyan, told RFE/RL’s Armenian Service on Tuesday.
“The 3 percent rate is set for low-wage earners while the 0.85 percent for higher earners,” complained Papoyan.
The government and My Step’s parliamentary leaders have not yet reacted to the proposed changes.