Last week the government decided to make some changes concerning the fixed tax in the tax law. Particularly, the government suggests to tax 1815 AMD per square meter for using areas up to 7 square meters in trade fairs. What does this mean? Despite the mentioned proposed amendments, the fair markets pay such fixed taxes, so what is the purpose of this new tax?
It turns out that this amendment concerns the persons leasing certain areas in trade fairs and involved in the trade business. If this bill is approved by the parliament, persons occupying up to seven meters in fair markets will have to pay 1815 AMD tax per meter. This means that the desks in fairs are going to be taxed too. Up to now they didn’t pay taxes to the government and just paid rent for their territory to the owners of the fairs. Last year the taxation bodies tried to install cash registers at those desks for the purpose of controlling the cash flow and taxing them, but the sellers organized rallies and even were supported by some political powers, which wanted to gain some political benefits from those actions. Due to these actions, the intention of the taxation bodies failed. Later they tried to register those businesses, but they failed again. The lessees of the desks say that they pay high rent to the owners and they can’t pay taxes too. In spring, the mentioned bodies tried to take some steps again, but the process was delayed due to the parliamentary elections. Thus, this process is starting again and it seems that the authorities are decisive in their intention and will start that process slowly, but in any event they will tax.
“We want the businesses in trade fairs to work in the same conditions as other businesses,” says the deputy chief of the taxation services, Armen Alaverdyan, “They should conduct their business in equal conditions. In addition, all citizens with whom we have talked don’t want to conduct illegal activities. According to surveys, due to this program about 10,000 citizens will be registered and become normal taxpayers.”
When this bill was developed the opinion arose that the government wants to provide the necessary level of tax income to the budget. The taxation bodies have to collect AMD48mln more this year. The government initially announced that the mentioned sum would be collected from the shadow economy. In this view, the workers of trade fairs are considered to be shadow businesses, as they don’t pay taxes.
“We don’t have any problems providing the necessary income to the budget through taxing these businesses. The issue consists of providing equal conditions for all the participants in the marketplace,” explains Alaverdyan. “Now there are thousands of citizens that are conducting business in those areas, even though they are small businesses. Up to now, they haven’t acquired state registration, and are not registered with the Taxation Department. This creates unequal conditions. Citizens that are conducting business outside of those fairs and are occupying that much territory are independent taxpayers and are registered, but those who have been working in fairs are not registered and don’t pay taxes. We want to create equal conditions for these two types of taxpayers.”
Also there are many lessees in trade fairs that occupy territories more than 7 square meters. Mr. Alaverdyan suggests such participants to become taxpayers and pay either simplified or other types of taxes. The taxation bodies think it is not fair that the other retail trade businesses, such as shops, pay taxes normally, but the ones that have stands in trade fairs pay a fixed tax only.
“Why should the tax climate be better for those in trade fairs? A simplified tax is paid by the entities whose annual turnover does not exceed AMD50mln. In case of 50mln, the simplified tax sum is 3.5%, which adds up to 1,750,000AMD. Now please imagine that a person who occupies 7 square meters in a trade fair, sells fur coats and has a 50mln turnover, pays 180,000 tax. This is eight times less than the simplified tax. That is why we should slowly create equal conditions. Firstly, everyone in the field of trade shall be registered; secondly, only small businesses shall pay the simplified tax. Bigger businesses shall pay higher taxes, as they have more clients. We need time for this, and I believe this field will be fully regulated in 2-3 years.”
We have also discussed numerous times that the owners of trade fairs also don’t pay taxes correspondent to their income. They take 10-25 thousand drams for each meter leased, but pay only 3 thousand in fixed taxes per meter. The fixed tax paid by the organizers is established by the law. As for the taxation bodies, they don’t think it necessary to increase that sum, since they say they cannot prove that they get super profits. The owners fix smaller sums by 5-6 times than they take for the leased stands. Mr. Alaverdyan has heard about this too, but he says no lessee of stands has openly confessed so far that he/she has paid more than the fixed sum. The deputy chief of the taxation services assures that their next step, following imposing taxes on the lessees, will be analyzing the expenses of the trade fair organizers. And if it turns out that they take more money by 5-6 times than shown, they will increase the taxes to be imposed on them.