Nikol Pashinyan: Introduction of flat scale of taxation of salaries will allow to legalize incomes and seriously stimulate economic growth.

ArmInfo. The introduction of  a flat scale of taxation of salaries in Armenia will allow legalizing  shadow incomes and seriously stimulating economic growth. Prime  Minister of the Republic of Armenia Nikol Pashinyan stated this on  his September 6 page on the Fesbukov page, presenting in the video  the two scenarios of changes in the income tax, profit tax and  dividend tax.  "I believe that it is necessary to continue to reduce  the income tax in the future.The government is ready to commit itself  in the coming years to reduce the flat scale of taxation by at least  0.5% per year in order to reach a 20% threshold in 5 years. , this is  a very good prospect in terms of a serious impetus to the development  of the economy, " - N.Pashinyan noted.

According to him, the government is also considering a proposal to  equalize the tax on dividends, which according to the current  legislation for residents is 5%, and for non-residents 10%. "Knowing  that most of our non-residents are our compatriots, whom we consider  full-fledged citizens of Armenia, the government discussed and  decided to apply a flat tax scale here as, in terms of stimulating  investments, the difference in taxation between foreign and local  investors is not a good message for providing a favorable investment  environment, "the Prime minister said.

"Today the scale is the following: with a salary of up to 150  thousand drams, income tax is charged in 23%, from AMD 150 thousand  to AMD 2 million - 28%, and above AMD 2 million - 36%. What is bad  about this taxation system and why I answer: it's bad, because it  creates a very serious workload for the working citizen, but there is  another weighty negative reason, namely, this tax system helps the  shadow economy, and does not stimulate the increase of salaries, and  the problem is that Armenia has a income tax of 20% plus In fact, we  are faced with such a dilemma when for a resident of a business  entity the profit tax together with the tax on a dividend on two  scales is lower than the income tax.This leads to the following  effect: economic entities take steps to collect only the profit tax  plus the dividend tax, in other words, conceal the real wage in order  not to pay a high income tax, and make the received income as profits  and dividends, and issue salaries to employees "black cash ohm "in  the envelopes. As a result, for example, a salary of 250 thousand  drams is given to the employee, instead of which a much smaller  amount, say, 100 thousand drams, appears in the document, "the prime  minister explained.

He said that he had discussed this topic for a long time and  presented two variants of changing the income tax to the public,  noting which of the scenarios, in his opinion, is most suitable for  the long-term policy of Armenia's strategic development.  The first  scenario envisages a two-stage taxation instead of a three-stage  taxation, with which the threshold of taxable wages is changing.  Namely, with a salary of up to 250 thousand drams, the income tax  will be 20%, and above 250 thousand AMD - 25%. Under these  conditions, there will be a noticeable decrease in income tax, which  will have some positive effect. The advantage of this scenario,  according to the premier, is that it is more consistent with the  logic of social justice and at first glance it seems most attractive.  But for comparison, N.Pashinyan presented the second scenario of  changes - a flat scale of taxation, where, regardless of the amount  of salary, income tax is charged at 23% and the profit tax plus  dividend tax is also 23% (18% + 5%).  Then he went on to compare and  analyze the advantages  and shortcomings of these scenarios. "The  social justice and attractiveness of the first scenario is deceptive  and I will tell you why: the citizens who receive a salary of 100  thousand drams will increase their income by 3 thousand drams, but  for a considerable part of them taking into account the payments  under the accumulative pension system (we are talking about 199,211  thousand people .) The income will increase insignificantly, namely,  with a salary of 100,000 drams - by 500 drams, and with a salary of  150,000 drams - by 750 drams. This is a meager increase. The first  scenario - a two-stage scale - has another drawback - it continues to  stimulate the black bookkeeping, as soon as possible In the case of a  lower tax scale, economic entities will try to hide the real size of  salaries in order to pay less for taxes. As for the second scenario -  a flat scale of taxation, I will say that we like it more  strategically and there are several reasons for that. The fact that a  potential investor wishing to invest in Armenia first of all is  interested in whether a flat tax is working in the country.  The   second advantage is the simplification of the tax system for both  investors and local entrepreneurs.  The third advantage of a flat  scale of taxation is the stimulation of income legalization. But with  all that, the flat scale has drawbacks, the first of which is that it  is profitable only for citizens with a high salary (200 thousand  drams or more), which on the other hand can be considered an  advantage, as they accumulate funds , according to our estimates,  this is approximately 38.5 billion drams, which they will naturally  spend. And these funds will either go into the economy or "settle" on  deposits in banks, which in turn will lead to a reduction in loan  rates, and this will make it possible to issue cheaper agricultural  loans. But the most important drawback of the flat scale of taxation  is that citizens with a salary of up to 150 thousand drams will not  feel a change in the tax burden, that is, it is a relatively  vulnerable category, and there are about 360 thousand people. is half  the working population of Armenia. But if we take into account 2.5%  of the funded pension system subsidized by the government, this  category of working population will still feel the changes: 2500  drams with a salary of 100 thousand drams and 3,750 drams with a  salary of 150 thousand drams, "concluded the RA Prime Minister.