ArmInfo. Taxation of incomes of individuals in Armenia is too high, which affects the national economy and makes the products produced in the country uncompetitive. Deputy Minister of Finance Arman Poghosyan expressed this opinion on February 12 on the margins of an international conference entitled "Tax System, Justice and Economic Development."
Currently, Armenia has the following taxation scale: those who receive a monthly income of up to 150 thousand drams pay 23%, from 150 thousand to 2 million drams - 28%, and more than 2 million drams - 36%. The draft amendment "On Amendments and Additions to the Tax Code of the Republic of Armenia" provides for a transition to a flat income taxation system, which, regardless of the amount of wages, will be set at 23% from September 1, 2019.
According to the Deputy Minister, the current system of income taxation is consonant with the principles of social justice. At the same time, as Poghosyan pointed out, the system is progressive only in name and in the classical sense is far from being such.
Analysis of the labor market, as the representative of the Ministry of Finance stressed, showed that only 65% of working citizens of Armenia receive salaries of up to 150 thousand drams. They are also beneficiaries of 32% of all revenues. The second group of citizens is 32-33%, receives a salary of up to 2 million drams, but its share is 60-61% of all revenues. And only 2-3% of working citizens receive a salary in excess of the 2 million threshold.
The situation, as considered by the Ministry of Finance, does not reflect the real state of affairs and is due to the employer's unwillingness to fully declare employee income. This, in turn, is motivated by the fact that taxation of personal incomes of citizens in the republic is high, which makes the national economy uncompetitive. As it turned out, the profitability of export-oriented areas of the economy is 2-3 times lower than the rest. "This is the main reason that prompted the Ministry of Finance to reflect on the introduction of a flat income tax scale," Poghosyan explained. An important role was also played by the understanding that the progressive scale is more costly in terms of the use of administrative resources for tax collection.
Nevertheless, according to the Deputy Minister, Armenia if not tomorrow, then in the near future will return to a progressive income tax scale. "In my personal conviction, after a certain period of time, we will return to talking about a progressive scale of personal income taxation. But before that we have to work on improving the competitiveness of the national economy," he said.
To note, the majority of opponents of tax amendments initiated by the Ministry of Finance speak out against the equalization scale of income tax, considering that those who already receive high wages will remain in advantage.