After a long time the government has decided to install cash registers in fairs as well. It means that very soon small and medium trade businesses are going to have cash registers. Even though the government has adopted a decision that such cash registers will be bought not by the sellers but by the organizers of such fairs, the sellers feel bad and are worried. They feel powerless because one of the people who used to raise their issues and protect them, Artur Baghdassaryan, is now busy with national security issues but not such minor issues.
Even though sellers are complaining more than the organizers of such fairs, the government officials say that it had to be the vice versa. “The fact is that all that load will be put not on the sellers but on the organizers and the owners of such fairs,” said PM Tigran Sargsyan during a recent session of the government when discussing issues on economic reforms in the fields of small and medium businesses.
Unlike all these assurances sellers are worried because in addition to high payments they also have to pay additional taxes, social payments from their pockets. Sellers wander why they are the ones who have been targeted by the government. In answer to complaints and publications of the press the state taxation service has issued information sheets for sellers and organizers of fair markets. Certainly these information sheets contain information concerning the reformations but still there are a number of questions without answer. For the purpose of getting answers to these questions we have interviewed deputy chief of the taxation services Kajavan Nurijanyan. The latter assures that they have targeted big businesses because they expect that most of the budget incomes will be paid by big businesses. “The first 300 taxpayers are paying 70% of the entire tax amounts. If we want to increase the budget and regulate the tax incomes we have to target the biggest businesses and those which are bigger than the medium businesses,” said Nurijanyan.
– Mr. Nurijanyan, may we assume that most of the shadow is covered by those 300 biggest taxpayers?
– No, there are many good businesses among them which are working in transparent and open conditions. However there is shade among the 2000 taxpayers because definitely they need those 50 thousand sellers to “clean” that shade. Every product that is imported in Armenia ultimately will be sold. If we discover the real capacity upon the last point of selling such goods, there will be no goods without taxes. Indeed if we lose the documents and traces on the way, we will lose taxes as well. Big taxpayers have a way how to import products, for example they buy products for 200 dram and decide to sell for 250 in order to make 50 dram in each of such products. In order not to pay taxes for that 50 dram they are forming the documents as they have sold those products for 205 dram and accordingly pay taxes for that 5 dram in each product. If we don’t want to lose that trace, the final sellers have to give a document to their buyers so that we can control that chain of trade. This is the first phase.
– Does this mean that your are starting that chain of control from the consumers in order to find out what is happening before that?
– We are starting from two different points. We started from big businesses, checked up the activities of super markets, even we closed some of them. We saw that there is a place when documents are lost and this place is the market. If sellers make their trade based on documents, it is clear how the trade transactions are made and it is easy for us follow the processes. If they are selling products based on the cash register, again they are losing the trace. Big businesses are interested in this method more because by doing so they are “losing” their products. Now we want to install cash registers in all places and follow the circulation in order to make everything transparent. I understand that the impression is that we are working on small businesses (despite the fact that they have to pay taxes too and no one should be free of taxes). However now we don’t want to make their load heavier. Most of the sellers are paying money and they think that taxes are included in that payment too, but taxes are not included in such payments.
– Could you specify what taxes private entrepreneur sellers will pay besides fixed tax if they are taxed?
– Fixed tax is paid only by sellers who are selling their goods in territories not more than 7 square meters in Yerevan and 10 in other places. For one cubic meter they pay only 1815 dram. If a seller works in an area not more than 7 square meters, and his/her annual circulation does not exceed the defined sum, he/she will pay 43 thousand per month, which also includes the social payment and fixed tax, if the documents show that they don’t exceed the sum of 1.2 million on one square meter. According to the new project which encourages small and medium businesses this payment will be reduced to 25 thousand. One of the new advantages of this project is that the sellers will not have to keep accounting books. They will use only cash registers and keep all the documents they have.
– What about submitting reports?
– Yes, once three months, but the reports will be simplified. By the way, according to the new project the places where such fairs or trade will take place will be subject to licensing. It means that if the owners want to make trade, they have to get a license. One of the preconditions of issuing such license is that the ones who are applying for license shall have cash registers in their fairs, which shall be connected to each other through a network. It means that the taxation officers will not have to visit the places of trade for the purpose of finding out the numbers they need. They will take that information from the server and will not have to bother the sellers. This is done not only for the purpose of saving time and efforts of human resources but also reducing the communications of tax officials and sellers. They can even cast the reports into a report box and not to communicate with the taxation bodies and officials. They can even send those reports by e-mail. Besides that, the chief of taxation has issued an order to limit checking activities at trade centers. Now we are transforming a new method of checking financial activities which is based on new risks. Small businesses are not included in that risk zone of course if they work properly and don’t try to cheat us. Due to this new method we will try to tax the big businesses.
– What should the annual circulation be so that the small and medium businesses involved in trade can work only based on fixed tax?
– Fifty million dram.
– It means that the daily circulation is about 170 thousand dram or 500-550 dollar. The traders of fair markets are supposed to have more circulation in order to pay the taxes which cover about 1000 dollar. Such payments include fees for areas, parking, electricity, etc. It means that either they will have to hide their real circulation capacities or pay more taxes and have more troubles. In such case why do you think that cash registers can help to fight tax shade?
– Of course there is a group of businesses which have more circulation, but their number is not so big. Most of them sell goods worth of 60-70 thousand dram per day. You mean those who are selling expensive clothes. But there are people who are selling small things and their daily circulation is less than 5-6 thousand dram. The people you said really have bigger circulation of money and they have to pay more taxes. If doctors and teachers are paying why shouldn’t they pay too?
– Those people say that they have to pay big sums for renting their places and they don’t care about whether they are paying that money to the government or to the owners of the markets.
– It is a pity that we have that way of thinking. During the soviet times there were private cars too and people used to escape from the state owned vehicles and take private ones. That way of thinking not to give money to the state and it is better to give money to private ones instead of paying to the state is not a good thing and we should get rid of it.
– They have some reasons to complain too because they have to pay for everything, even for going to toilet and now they have to pay additional taxes too.
– Don’t forget about the fact that they are the ones who make contracts and they are a party to such contracts. The state can help them to solve many problems, but of course not on the account of the state. At least they are not the needy sector of the society of this country. We have many pensioners and other people who are really in need.
– What will be done for the organizers of such markets? They are not the wealthy ones either.
– They will have to pay huge money to install those cash registers and coordinate the trade relations.
– It is not so big money for them.
– Yes, you are right, but you’d better ask that question to them and see what they think about it…
– Let’s take the Hrazdan market. Each seller has to pay 220 thousand dram every month, plus they also have to pay other additional expenses such as electricity fees, toilet, etc.
– All those things should be considered in the provisions on licensing. They should also take into consideration the hygiene conditions and other relative issues. This draft will be presented at the national assembly on the 19th day of this month. A part of the changes will enter into force starting from October, and the other part a little bit later.
– Are there any guarantees that after doing all the requirements and getting the licenses the owners of market places will not increase the payment fees? If they do this people will complain more.
– We will lose all our tools we have not to let those fees go up. The most important thing is that the two parties, the organizers of the market and the sellers, are executing bilateral agreements. It is up to them to decide the conditions of their cooperation.
– Now in fact the organizers of those markets don’t do anything, they just have territories and give those territories to sellers and take huge payments from them. As a rule, the current expenses are made by the sellers. Have you ever tried to find out what their expenses are and whether they have enough incomes to pay such high rent prices and expenses? I mean that some people have super-profits.
– Yes, in separate places people have super-profits. I agree that in some cases we have a lot to do to correct the situation. We have a mechanism of double taxing, which means that if their incomes exceed a certain defined level, the capacity of the taxes to be collected from them shall be doubled, however we are not limited with these actions and there is still much to do.