Armenian Finance Ministry: revision of income tax rates in this  fiscal year is unlikely

ArmInfo. The current head of the Ministry of Finance of Armenia and his colleague who recently left this post believe that the beginning of 2019 is the most probable  time for the revision of income tax rates.

This opinion was expressed in the conversation with the ArmInfo correspondent by the Minister of Finance Atom Janjugazyan and ex-minister Vardan Aramyan. They said  that in the context of clarifying the country's tax policy in July, a  technical assistance group of the International Monetary Fund (IMF)  will arrive in Armenia.

According to the ex-head of the Armenian Ministry of Finance,  representatives of the IMF in the framework of promoting economic  growth of the RA will once again study, "rethink" the tax policy of  the republic. It was with the technical assistance of the IMF that  Armenia developed the Tax Code, and also revised the country's fiscal  rules. During the visit, as Aramyan pointed out, within the framework  of fine- tuning the tax policy in the medium and long term, the  parties will also touch on the possibility of revising the income tax  and turnover tax in Armenia.

The work on the "rethinking" of the Armenian Tax Code, adopted not so  long ago - in September 2016, will last at least 3-4 months. The main  vector of changes, according to Aramyan, will be directed towards  increasing indirect taxes (VAT, excise tax) and reducing direct  (labor and capital). In this context, according to Aramyan, the most  likely period for reviewing the rates of income tax falls at the  beginning of next year.

Minister of Finance Atom Janjugazyan, in turn, notes the obviousness  that the reduction in income tax in the short term includes fiscal  risks. For today, as the head of the Ministry of Finance has  informed, a variant of reducing the rate from the current 23, 28 and  36% to 20 and 25% is considered in particular. In this case, the  budget losses will make 45-46 billion drams, counting on 600 thousand  workers. Proceeding from this, initiating a rate cut, the Ministry of  Finance should be sure that the losses for the state budget will be  reimbursed by means withdrawn from the "shadow". Otherwise, as the  minister noted, Armenia will have to go on increasing the debt burden  to cover the budget deficit, which is extremely unacceptable. Thus,  according to the expert, the reduction of income tax in this fiscal  year is unlikely. The issue of reducing the tax burden was acute even  during the adoption of the new Tax Code in 2016, but then under the  pressure of the IMF and the World Bank the new government of  Karapetyan passed through the parliament this document. The political  opposition also raised this issue. Thus, the opposition bloc "Elk"  proposed revising the scale of income tax in the Tax Code,  supplementing it with one more "intermediate scale" for employees  receiving salaries in the range from 150 thousand to 300 thousand  AMD, fixing a rate of 26%.  "The proposed changes will have a  negative impact, including on the part of ensuring the profitable  part of the state budget," the then Minister of Finance Vardan  Aramyan said in February. He considered this proposal unreasonable,  since it does not provide for mechanisms for recovering budget  losses. We also note that, according to the rough estimates of the  Ministry of Finance, raising the VAT by 1 percentage point, it is  possible to provide the treasury with an additional 20 billion drams.