Tuesday, February 12 2019 14:21
Naira Badalian

Deputy Minister: The introduction of a flat income tax scale is aimed  at improving the competitiveness of the national economy

Deputy Minister: The introduction of a flat income tax scale is aimed  at improving the competitiveness of the national economy

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. 

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