The government has developed a new tax package for the discussion of the National Assembly, and this initiative contemplates changes to support the collection of 101 billion drams in the budget in 2012. These changes mainly mean increasing tax loads.
Let’s mention that during the session of the government on September 29 PM Tigran Sargsyan announced a sensational number saying that next year the budget inflow to the budget should be increased by 100 billion drams, which is more by 13% than this year. During the past years even in condition of double-digit growth such increase of budget inflow on taxes was impossible. This is a very ambitious number for Armenia. The government has decided to provide this inflow mainly by increasing the tax load. And now the executive power has in parallel with the budget 2012 worked out a new tax package and sent to the parliament. It means that there will be amendments of approximately 16 laws in environment payments sector. This package has not put in circulation in the parliament yet and it is discussed in working groups, and it will be discussed in new sittings agenda after having made certain changes. We were not able to collect information about it neither from the parliament nor from the government as they keep them confidential by reasoning that they have not finalized the drafts yet. Anyway we have found out several examples of amendments resulting in the increase of tax loads, which are very impressive. For example, the changes proposed by the government to the law on obligatory social security envisage increase of the social payment from 7,000 to 9,000 drams. In addition, in case of salaries higher than 100,000 drams the social payment will be raised from 19,000 drams to 21,000, and also 20% overpayment deducted from the amount higher than 100,000 drams. Generally, in this tax the government is suggesting to increase the tax payments by 30%. Maybe due to this in the budget of 2012 the government intends to collect by 18,7 billion drams more tax (instead of 123,4 billion they want to collect 142,1 bln).
Another recommendation proposes increasing the excise tax for alcohol of local production. This means that the price of the local alcohol will be almost the same as the imported one, as a result of which this decision may kill not only the local production of alcohol, but the agriculture sector service that serves this direction. For example, if this happens, there will not be profitable to produce wine in Armenia, thus farms and villagers will have to stop producing grapes. If they raise this tax, both a part of the local production will be killed and many people will be unemployed.
The government is proposing to increase the fixed tax too, as well as in the sector of banking and other services. They have also decided to establish 10% tax from products that have been in the list of untaxed products so far. The mentioned changes are only a part of the changes proposed by the government. In a word, if the government sends these recommendations to the parliament and the parliament adopts them, it will seriously undermine the economy.
At the same session of the government prime-minister Tigran Sargsyan also spoke about increasing taxes by 0,6%. If it happens, in the end of next year the relation of GDP and taxes will become 17,3 instead of the 16,8 planned for this year. For example, in Georgia this rate is 25%, which is the same as in Nagorno Karabakh. In some countries this rate is even more than 40%. The higher this rate is, the smaller the shady part of the economy is. Some experts say that the shady part in the Armenian economy is about 50-60%. The government is raising the tax load on businesses instead of cutting down the shady part of the economy, which will kill first of all small and medium businesses. As always, this year too before elections the large businesses will continue escaping from taxes. The reason is the fact that the ones that bring votes during elections are the large businesses.
We tried to ask for comments from representatives of the government and other officials but they refused to give any information. Everyone refuses to comment and says that the draft laws are still being discussed.