Monday, July 9 2018 18:12

ArmInfo.The Armenian government tomorrow, July 10 at a Cabinet meeting will consider the legislative initiative to reduce the rate of income tax, in all likelihood, will  reject the proposal to reduce it.

In particular, the draft law "On changes in the tax code of the  Republic of Armenia" proposes a reduction in the income tax rate in  the following order: incomes of individuals up to 500 thousand are to  be taxed at 20%, and the proposed rate for workers receiving wages  exceeding half a million drams will be 25%.

At present, wages of up to 150 thousand AMD are subject to a rate of  23%, for employees who receive from 150 thousand AMD to 2 million  AMD, the rate is 28%, for persons with a salary above this bar, the  income tax rate is 36%.

In connection with this proposal, as the reference to the rationale  for the document says, the government as a whole agrees with the  above arguments that the size of the current tax rate may have a  negative impact on the economy of the country. Nevertheless, the  Cabinet considers that the issue should be considered  comprehensively, both taking into account its positive and negative  consequences. In particular, there are risks for tax revenues of the  state budget in the form of a shortfall in tax revenues amounting to  45-47 billion AMD annually. Consequently, as noted, when taking a  decision to reduce the income tax rate, the government should have  ready-made mechanisms to compensate for possible losses, in order to  avoid an increase in the budget deficit.

The Armenian government reports that at this stage, jointly with the  IMF experts, a joint analysis of the current tax system is conducted  to assess the compliance of the current tax policy and tax  administration with the current economic situation in Armenia.

"Taking into account the above, the Government of the Republic of  Armenia is proposing to abstain from implementing these changes at  this stage and to return to the issue after the completion of this  analysis in the context of the planned tax reforms," the document  says.

Before 01/01/2018, the following income tax rates were established  within the Law on Income Tax: 24.4% from a monthly salary of up to  120 thousand drams, 26% from a salary of 120 thousand drams to 2  million drams, and a salary of more than 2 million was taxed in the  amount of 36%. At the same time, as Deputy Minister of Finance Arman  Poghosyan recently stated in an interview with ArmInfo, the revision  of the tax rate of income tax did not promise additional revenues to  the state budget - in fact, in due time, the new norms of the TC  envisaged reducing the tax burden for citizens receiving wages not  exceeding 280 thousand drams, which is 550 thousand people or 90% of  all employees, while for the remaining 50 thousand (10%) they  slightly increased. Moreover, as he pointed out, due to the decrease  in the effective tax rate from 25.8% to 25.3%, budget losses amounted  to 3 billion drams.

Noting the visit of the IMF mission within the framework of the  planned tax changes, the deputy minister said that, naturally,  Armenia listens to the opinions of its international partners,  actively uses their experience and recommendations, since such  systemic changes are not implemented in isolation and without  consultations with international partners, especially donor  organizations , which simultaneously provide budgetary assistance to  Armenia. "But I assure you, we are not limited in our decisions -  both then and today we will be guided by the priorities and interests  of our country," he said.