Armenia does not abandon the idea of imposing VAT on agrosphere

ArmInfo. Armenia did not abandon the idea of abolishing the preferential tax regime for agricultural producers. At this stage, as the Deputy Minister of Finance of Armenia David Ananyan told ArmInfo correspondent, the department reflects on possible mechanisms for abandoning the practice of non-use of VAT for agricultural production.

According to the Deputy Minister, currently the Ministry of Finance is in a passive search for approaches, as well as the development of a possible tool to ensure the transition of the agricultural sector, now taxed from turnover, to the VAT tax field. Discussions in this direction are ongoing.

Representatives of a number of spheres of agriculture even spoke in favor of the abolition of the preferential tax regime for agribusinesses. During the Ministry of Finance discussions, the cheesemakers complained that they refuse to accept goods in large retail chains, since they are taxpayers of the turnover tax. At the same time, supermarkets are ready to purchase the product from a reseller, who pays VAT, as this gives them the opportunity to refund (calculate) the tax.

The Ministry of Finance, Ananyan said, has no right to force the supermarket to buy goods from the cheese, as everyone decides how to organize their business. "We can offer representatives of the agrosphere to move to the field of VAT regulation at a rate of 10% -v, but without the right to calculate for producers," the deputy minister said. In fact, as the representative of the Ministry of Finance noted, cheese makers agree on these conditions, since if we calculate the cost of 1 kg of cheese, conditionally, at a rate of 1400 thousand drams, of which 1000-1100 drams is the cost of milk they buy from the farmer, it turns out that for the cheese-maker it is not so reasonable to seek the calculation for VAT.  However, not everything is so unambiguous. As David Ananyan noted, the producers of dried fruits spoke out against the idea, as their product cost structure differs radically from the product of cheese-makers.  Thus, the Armenian Ministry of Finance has not found the mechanism of abolishing the preferential tax regime, which is optimal for all parties.

It should be noted that the use of VAT for agro-industry is among Armenia's obligations to the WTO. On February 5, 2003, Armenia formally, according to WTO procedures, became the 145th member of this trade organization. In the process of Armenia's accession to the WTO, all the legislative changes necessary to bring the existing laws into line with the WTO norms were made, and after joining the WTO, the RA does not have obligations to change a law or subordinate act during the subsequent time. Even then, in a number of negative consequences for Armenia, the imperative to abolish the current system of exemption from value added tax of local producers was noted at the first stage of sales (only the sale on the part of the producer is released, further sales levels are taxed for the entire volume of sales of agricultural products) that exemption from VAT is now an integral part of the local agricultural producer protection system. It was also noted that after Armenia's accession to the WTO, it will take time to abolish the existing tax exemption system and introduce a new system of protection, the subsidy system. The parties agreed to provide Armenia with a deadline until 2009 to implement these changes. Nevertheless, it is obvious to this day that, in general, the transition to a subsidy system can be quite painful for the country's budget, which will also affect the sustainability of economic growth.

In the meantime, despite the economic activity recorded in Armenia in 2017 and January 2018 of 10.2% and 7.7%, respectively, the agricultural sector, in 2017, delayed in the recession, it only slowed down to 3% from 5.2% in 2016, and in January of this year. The volume of gross agricultural output decreased by 0.4%, amounting to 17.5 billion drams.