ArmInfo. Armenian business community hopes that the new government will significantly improve the Tax Code developed by the government and adopted by first reading in parliament. They also hope that the bill will be adopted not just because the time is an issue and because it is one of the terms of allocating another tranche from IMF to reduce budget deficit.
Representatives of small and medium business and American Chamber of Commerce in Armenia (AmCham) touched upon these issues at the discussion of the new Tax Code. It was noted that active work on drafting the Code has been conducted in Armenia since last year. Various organizations, representing businessmen's interests and expert community sent to the governmental agencies hundreds of recommendations for improvement of the document, numerous consultations were held aimed at developing common concept of the document. However, according to the common opinion of the discussion participants the document adopted by the parliament at first reading is weak, unbalanced and does not meet demands of country's development.
President of AmCham, famous economist Tigran Jrbashyan voiced the organization's recommendations on tax reforms and proposed so called concept "21", based on unification and facilitation of the rates of the main taxes on the level of 21%-on VAT and income tax. Profit tax rate should be 10% plus 11% on dividends. At the same time in order to increase internal capital investments profit directed to development of companies should not be taxed. AmCham also proposes not to tax income lower than minimum consumer basket as well as to withdraw government's proposal of graduated taxation between 1-2 mln drams, as in fact it will lead to shadow employment in IT and financial sectors.
According to experts' calculations increasing VAT rate by 1%-21% will raise budget incomes by 20-21 bln drams y-o-y and will compensate possible losses from reducing income tax rate to 21%.
Touching upon development of such sectors as mortgage lending, health insurance and education Jrbashyan proposed to pay special attention on expanding and raising efficiency of so called credit system-reciprocal payment of income tax and VAT, their recalculation and establishment of maximum threshold of accounting, and the credit system should not work higher than the established threshold to avoid financial fraud. The expert proposed to lay VAT on healthcare and educational services introducing system of tax credits, these funds will be returned to population.
The expert proposed to gradually raise cadastral value of property to its market value as well as introduce penalty charges for unfinished construction of industrial facilities. These measures will help to return a huge number of non-used industrial areas into economic turnover. It is also proposed to increase tax rates on property for the buildings, cadastral value of which exceeds 300 mln drams while the information about the owners of property amounted to higher than 150 mln drams should become available for society.
AmCham experts paid special attention to the issues of protection of investments including the foreign ones, predictability and stability of investment climate. For this reason any amendments in legislation should come into force in one year after their adoption, which will allow economic entities to adapt to new rules of the game. In case of large investments (1 bln drams) special tax regime should be determined within 5 years if desired by investor, during which any legislative changes will not affect the investor.
In a talk to ArmInfo's correspondent Tigran Jrbashyan expressed hope that the new government will succeed to postpone final adoption of the Tax Code until the main social economic essence of the document is defined based on "happy medium" between the implementation of efficient fiscal function by the state and development tasks of country's economy.