Do you remember what one of the heroes of the film “We Are Our Mountains” Avag (Azat Sherents) complained about when he used to talk disappointedly about thieves and their punishment? The “world”; that was what he was complaining about. The man felt that something was not right, that something was amiss, but he couldn’t say who was to blame.
On April 5, traders at the “Hrazdan” fair had organized a demonstration. What were they protesting against? To make a long story short, we could say that they don’t want to be registered as individual entrepreneurs and enter the taxing field, as required by law. So, they don’t want to abide by the law. This, of course, is a short answer. But in this case many questions remain unanswered and whether they like it or not, the traders find themselves the ones to blame, and the problem is far deeper than that.
These people understand that if they are selling something, then they have to pay taxes to the government. The problem is uncertainty. People don’t know what they are expected to do. They are afraid because they don’t trust the government. They know that the so-called “government” is, first of all, worried over stuffing some more money into the budget. They don’t really care if, for example, their policies lead to the bankruptcy of hundreds, even thousands of families, make them desperate and find means to go abroad. But there is a need to worry.
Recently, deputy head of the State Taxing Service (STS), Armen Alaverdyan, gave an interview to the “Hayots Ashkharh” newspaper, during which he expressed the opinion that the amount of tax to be paid seems high to people; they are worried that they will not be able to carry the burden of paying taxes as soon as they enter the taxing field. This is true, but there are other issues as well.
Mr. Alaverdyan mentioned that based on their information, the rent for a pavilion in different fairs of Armenia ranges from 10-35,000 drams a month. It is incomprehensive how they came up with that number. It would be naïve to think that the STS were not aware of the real amount of rents; for example, the rent for one pavilion in the “Hrazdan” stadium ranges from 180-225,000 drams. Whatever…
Alaverdyan mentioned that after registering as an individual entrepreneur, the traders will choose how to pay their taxes. They can work with the simplified or fixed tax. In the case of the simplified tax, the individual entrepreneurs will pay 3.5% of their sales, while in the case of fixed tax the price for one square meter of area in Yerevan is 1815 drams a month. In addition to this you have the social security taxes and the average monthly amount, according to Alaverdyan, will range from 20-25,000 drams. Judging from the conversations with traders, we can surely say that they don’t accept that amount. But…there is one big “but” which the deputy STS head didn’t really discuss in detail. That was the social security tax.
The problem is that after the recent legislative reforms, the income taxes have taken on the role of a profit tax. For example, the trader working with a fixed amount may face serious issues by the end of the year. “Besides that (besides the fixed payments-B.T.), as an individual entrepreneur, he will pay 5,000 drams a month for social security taxes. After the end of the year, judging from his incomes (if he shows any income) we will calculate the final amount of social security tax and that amount may increase to a certain extent,” said Alaverdyan. Based on logistics, that “certain extent” may become a form of punishment for the traders.
By law, the individual entrepreneur occupying more than 7 square meters of territory is required to install a calculative cashier machine. By the end of the year, he will be asked: Did you have this much circulation of products? How much did you spend? Here is where the nightmare is going to begin because the individual entrepreneur will have to pay 15% social security tax.
What expense should the trader show by documents for his income to go down (otherwise his social security tax may reach 100,000 drams)? It is clear that the main expenditures that a trader makes are on products brought in from abroad. In order to show that amount as expenditures, it is necessary to pass it through customs legally and have corresponding documents. But we all know that a considerable part of the products entering Armenia circumvent the Customs Body. If in this state of “circumvention of customs” the trader tries to legally pay the VAT and the customs tax, a couple of days later he will go bankrupt because the prices for his product will already be up. In a word, in this sense the State Taxation Service is also trying to compel people to increase the amount “shown” for passing customs. The trader is also going to try to receive a document for each of his expenditures. The next big payment is the rent which, as mentioned above, makes up 225,000 dram at the “Hrazdan” stadium. As you saw, the STS officials don’t have a clear view on this amount-they think that it ranges from 10-35,000 drams, or they know very well that it is 225,000 drams but can’t prove it. In this case, when the individual entrepreneur explains his expenditures by presenting the 225,000 dram receipt, the STS will be able to wag its finger at “Hrazdan” and may confiscate additional money from “Hrazdan” through the means of corresponding legislative reforms. The traders at “Hrazdan” know that too and a question comes up: will they really show that corresponding receipt? In a word, what we get is an unpleasant situation. Logically, traders need to demand receipts when paying for parking, electricity and even for restrooms.
Why is the “Hrazdan” administration interested in having the traders doing business in its territory receiving the status of individual entrepreneurs? It is because the administration fears that the State Taxing Service foresees taking a bill to the National Assembly in the fall whereby the owner of the fair of each non-registered trader will pay a fee of half a million drams.
So this is all full of displeasing consequences and perhaps that is the reason the process was temporarily frozen. Who needs to cause a scandal during the pre-election period?
Then “Judgment Day” will come. The paradox is that everyone thinks he is correct-the State Taxing Body wants to make sure money flows into the budget and bring people into the taxing field, the sellers want to pay less because they are already paying too much for their spot, “Hrazdan” doesn’t want to have problems with the State Taxing Service and the latter doesn’t want to have Robert Kocharyan reprimand them “for not showing enough diligence”. This is the situation in which it is very difficult to find who is to blame. That is why people are complaining about the “world” because there is anarchy everywhere and all the loops are interconnected-sellers, customs, fair, taxing, etc. This is a closed chain where touching one loop will cause a chain reaction with unpredictable consequences.