Armenia`s chief tax officer is going to raise the issue of revising  the income tax refund program for mortgage

ArmInfo. David Ananyan, Chairman of the State Revenue Committee of Armenia (SRC) advocates revising the income tax refund program in the framework of mortgage lending and reducing the cost of one transaction from the current 55  million to 35 million drams, Ananyan said at a press conference on  October 16.

According to him, before making a discussion on this issue, the goals  of the program should be understood:  whether these goals are social  or aimed at supporting the construction business. "If it pursues a  social goal, then the tool has the right to exist, and if it serves  the purpose of supporting business, then I, as an economist, do not  consider it justified and this is not the sector that the state  should support. There are export-oriented business areas, in which  the state can invest much more effectively, "he said.

Ananyan recalled that when the program was launched, the return on  funds amounted to 600-700 million drams, according to data as of  October 15 this year, it already totals 5.5 billion drams, and by the  end of the year, the figure will reach 8-9 billion drams.

According to the head of the SRC, this program needs to be reviewed  and agreed upon. "If we all decide that it has a social orientation,  then it is necessary to review the threshold of the transaction - the  current bar of 55 million drams (about $ 115 thousand) is a very high  figure, which should be reduced to 35 million drams (almost $ 74  thousand), "Ananyan said.

At the same time, as the Chairman of the SRC pointed out, today the  government does not hold discussions or have intentions to revise the  program. "But I'm going to raise this issue in government - let's see  if we are able to bear this burden over the next years. In my  opinion, there will be difficulties, " the chief tax officer  concluded.

Earlier, in an interview with reporters, the former Minister of  Finance of Armenia Vardan Aramyan stated that instead of stimulating  the non-exported sector of the economy, in particular, the  construction sector, the country's authorities should take very  unpopular steps to ensure long-term economic growth. In particular,  programs that significantly contribute to apartment building need to  be rethought.

"In 2016, when this tool was introduced, the main idea was that it  should be economic - give an incentive to capital construction and  after a while the Government should exit this program," he explained.  According to Aramyan, if a social component is attached to the  program, then its maximum threshold should be comparable with the  maximum cost of purchased housing under the "Affordable Housing for  Young Families" program of 30 million drams in case of buying an  apartment in the primary market (from the developer), and in the  secondary - 25 million drams.

However, in a conversation with representatives, Deputy Prime  Minister Mher Grigoryan declared that in the current system one  should not seek for attempts to stimulate the construction boom.  "Maximum cost for 55 million of acquired property for the return of  income mortgage interest tax is thereby the social threshold that is  not worth revising, "he said.

To recall, in 2017, the financial authorities of Armenia stated that  the legal norm in force since November 2014 aimed to form stable and  solvent demand in the field, as well as solve social problems. There  were no restrictions on the number of such loans or the social status  of the buyer. As a result, the social component turned out to be  insignificant. The Ministry of Finance monitoring revealed that most  often the legal norm is used by those who do not have the goal of  solving social problems, but are only enriching themselves by  acquiring another property.  The Armenian government stated that if  there is a desire to stimulate the economy by injections at the  expense of the state budget, the real estate market is not the  priority direction of the economy that requires investments from the  state. As a result, the authorities decided to focus resources on  maintaining the exclusively social component of the program - the  legal norm should support those who actually solve their social  issues. In order to mitigate such risks, the Government decided to  take a number of restrictions. In particular, from January 1, 2018,  interest will not be compensated for in a transaction exceeding 55  million drams (about 115 thousand dollars). The amount, according to  the authors of the document, is the equivalent of the cost of an  apartment of 135-140 sq.m in the center of Yerevan. The second  restriction concerned the amount of income tax that the state returns  to the "mortgage" - within the framework of one transaction no more  than 1.5 million drams per quarter, regardless of the number of  borrowers or co- borrowers. For a young family, if a couple acts as a  borrower and co-borrower, this means that the monthly maximum amount  of income tax in the form of a refund from the state treasury that  they can apply for is equal to 500 thousand drams (commensurate with  their monthly joint income of 1.6 or 1.7 million drams).  And  thirdly, it was decided that from January 1, 2018, the preferential  program can be used only once, whether it is a borrower or a  co-borrower.

As for the program "Affordable Housing for Young Families", here the  maximum cost of purchased housing is 30 million drams - in case of  buying an apartment in the primary market (from the developer), and  in the secondary - 25 million drams. To participate in the program,  the total age of the spouses should not exceed 70 years, the interest  rate is maximum 7.5% in Yerevan and 5.5% in the country's regions (on  the secondary real estate market), since in the first case the state  will subsidize 2% out of 9.5% per annum and in the regions - 4%.