Wednesday, September 19 2018 18:58
Naira Badalian

Pailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not change

Pailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not change

ArmInfo.After the adoption of the Tax Code in 2016, the Armenian government immediately admitted that it is not only imperfect, but also "choking" business from all  sides. Nevertheless, due to a number of objective and subjective  reasons, reforms in the sphere for Karen Karapetyan's cabinet have  come to an end yet, without having begun, at the stage of the  "statement of intent".

"Pay taxes and live peacefully," declared the  new RA Cabinet of Ministers and responsibly took the baton, focusing  primarily on the reform of income tax - as the most "popular" type of  tax. And, despite the fact that the British statesman and politician  Sir Winston Leonard Spencer-Churchill acknowledged that good taxes do  not exist, the Cabinet of Nikol Pashinyan, after lengthy talks about  the availability of 8-10 scenarios for the revision of income tax,  recently announced two options, while declaring his personal  commitment to the second. Pylak Tadevosyan, chairman of the public  organization "Protection of taxpayers", told in an interview with  ArmInfo that we did not change the "sew on soap" and what the  citizens will end up with in the end.

Mr. Tadevosyan, on September 6 this year. Prime Minister Nikol  Pashinyan presented two options for changing the income tax rate,  stressing that the people should make the choice. The first option  proposed by the new Cabinet suggests a 3% reduction in the income tax  rate to 20% on wages up to 250 thousand drams, and for those who  receive more, the rate from the current 28% and 36% will decrease to  25%. The second scenario of changes is the introduction of a flat  scale of taxation, where, regardless of the amount of salary, 23%  income tax and profit tax plus dividend tax are also charged at 23%  (18% + 5%). In your opinion, which of the presented options is  preferable?

In order to answer this question, first of all, it is necessary to  understand what purpose the government is setting by initiating these  changes: has the government decided to reduce the tax burden of  employers, or is it intended to increase the amount of household  disposable income. It is also possible that if the government  promises, if it approves the second variant - the introduction of a  flat income tax scale, from receiving low wages of citizens - the  state will continue to collect the payments provided for by the  compulsory funded pension system (ONPS), at the same rate - 2.5%, the  government tries Do not create a new burden for citizens in the  implementation of the system. Or maybe the Cabinet promotes  attraction of investments in the republic, offering the formula "23%  + 23%", that is, income tax with consolidated tax (profit and  dividend taxation). Depending on the intended goal, it will be  possible to judge which of the options proposed by the Cabinet for  reforming the income tax is preferable.

Today, if we consider proposals, for example, from the point of view  of increasing the amount of disposable income of households, it is  not clear, for example, whether the tax burden of low-income people  is justified at the same level.  Many argue that the announced  changes are aimed at reducing the "shadow" in the economy and  identifying real wages. This, incidentally, does not hide the  country's financial authorities. Do you think, in fact, the  introduction of an equalization scale will serve these purposes?

And who said that reluctance to register employees is due only to  this argument? Maybe employees themselves ask the employer not to  register them, so that they will not lose their benefits? And is  there even an approximate calculation of how many employees are  "sitting in the shadows" and initiating such changes, the question of  how many we are solving. Or maybe the price of the issue - to  transfer to the "white field" only 5-6% of "shadow business". But  even in this case, there is a risk that only a good half of "illegal  immigrants" will decide to reveal themselves. In this case, it is not  feasible to go for such a large- scale change of the entire system,  if it is possible to achieve this goal by applying other instruments.

How viable is the hypothesis that the advantage of the second  scenario is also that high-income workers accumulate additional  funds, according to the authorities' estimates of about 38.5 billion  drams? These funds, as the Cabinet expects, will either enter the  economy, or "settle" on deposits in banks, which in turn will lead to  a reduction in lending rates.  Believe me, the costs of this "estate"  will not change much. And then, who can guarantee that the employer  will not reduce the amount of the calculated salary and whether there  are administrative mechanisms that the employer will not allow to  take such measures. Or maybe the employer agreed with the employee  that he will pay him a conditional 300 thousand drams, and with the  reduction of the income tax rate, he will continue to pay these  agreed 300 thousand drams. In my opinion, as soon as the rate is  lowered, the employer will go on reviewing the estimated salary.  The  Prime Minister, speaking of the advantages of a flat tax scale, said  that it can stimulate the flow of financial resources into the  country. As Pashinyan pointed out, a potential investor wishing to  invest in Armenia is primarily interested in - whether there is a  flat tax scale in the country. In your opinion, in fact, this aspect  is of such fundamental importance when choosing a country for  investment and can its revision become a green signal for an  investor?  The issue of stimulating investment through fiscal policy  of the state should be considered in a comprehensive manner. The  investor before "investing" in the Armenian economy, will consider  different types and regimes of taxation. In this context, the tax on  dividends should not be considered a matter of paramount importance:  the investor will look at how the issues on depreciation charges are  solved in Armenia, for example, in the light of the recent  restrictions on reducing the base rate, in some cases, the effective  tax rate for profits reaches 30% -35 %. Thus, not knowing whether the  non-taxable threshold of personal income will be provided, the  turnover tax will be revised, whether tax regimes or benefits for  border villages will be preserved, it is unlikely that the investor  will be guided only by the rate of profit tax and dividends.  Based  on the foregoing, today to judge the success of the proposed changes,  to assess the first or second option, speaking about their  preferences - it's a thankless task. Without a well-defined and clear  goal, any changes will not be successful unless the goals, criteria  for achieving them are initially clear, as well as the obvious  advantages of the new, desired state. So far, we have not been  declared a goal. And what we were presented today is just a digital  balancing act, where the choice should be guided by sympathy for the  given figures: "Choose, figure 20 looks better or figure 23" ?. In  this context, I hope that we will still see real public discussions,  but not in the format of a written response to a corresponding  request from the state department, but in a live controversy.  Having  announced possible scenarios for changing the rate of income tax, the  prime minister, and then the head of the State Revenue Committee,  spoke in favor of the second option - the introduction of a  flat-scale income tax. Do not you think that this way they direct  public opinion?  It seems that governments have been changing for  many years in Armenia, but approaches, in particular in the tax  sphere, do not change. That is, the country's financial authorities  are not guided by specific goals, but only perform simple  mathematical actions, increasing or decreasing the tax rate.  Meanwhile, it is more correct to outline the goal, and only then to  look for approaches to it, considering each type of tax in  conjunction with other types and regimes affiliated with it.  The  financial authorities, speaking of possible changes, assured that the  reforms will be continued and the reduction of the income tax rate to  20% will be ensured within the next 5 years. According to Pashinyan,  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 achieve this 20% threshold in 5 years. What is it - a  demonstration of a clear intention of the Cabinet in the future to  reduce the rate of income tax or "good wish" in order to buy time and  today to achieve what you want?  Talking about its intentions for the  future 5-year anniversary, the Armenian government, wishing it or  not, announces about its program for this period. If this is actually  a benchmark for a given period of time, then this implies the  intention of a more thorough revision of the RA Tax Code in the long  term. In this context, it is reasonable to present approaches and  principles for a possible revision of all tax legislation. There can  not be a tax reform only on the part of income tax for the next 5  years, since all other types of taxes and tax regimes somehow come  into contact with it..  And if the authorities are not ready to talk  about a 5-year program, then now it would be more correct to state a  specific figure - the rate of income tax for the current year,  without touching the topic of future changes in the tax rate, keep  the threshold of the non-taxable VAT on turnover at 115 million,  which is planned from January 1, 2019 to reduce to 58.35 million.   Even Albert Einstein, being a Nobel Laureate said that "the most  incomprehensible in the world - a tax scale", so that not having the  desire to comprehend the incomprehensible, I would like to know your  point of view, as an expert, how should the tax system, in particular  In addition to solving fiscal problems, it would be aimed at ensuring  social justice, as Nikol Pashinyan said, by the way.  I am in favor  of a progressive scale of income tax. For example, I am in favor of  setting a 23% rate of income tax from wages to 2 million and 36% on  wages above this threshold. If the employer decided to pay someone a  salary of 4 million for "doing nothing", then why deprive the state  of the tax base.  On the other hand, let's not forget that the  progressive scale of income tax solves certain issues of income  redistribution in society. In this context, it may be necessary to  compare the issue of income redistribution with property taxes, that  is, to consider the issue of tax consolidation, including property  tax. Here it is necessary to be guided by the fact that persons who  receive income above a certain threshold accumulate their assets in  real estate objects or invest them.  But, since we are talking about  social justice, it is possible to be guided by the experience of a  number of Western countries, which establish the non-taxable  threshold of personal income, and only in excess of this figure, the  tax begins to calculate the income tax on a progressive scale. You  can also calculate and tax the cumulative income of the whole family,  rather than its individual working member, taking into account all  possible and necessary costs of the family. A taxpayer integrity  issue can be to stimulate when it - the taxpayer to make sure that  the taxes paid by them in the form of any of the services provided by  the state (medicine, education) be returned to him.  I recall that a  few years ago, initiating the process of adoption of the Tax Code,  the authors have proclaimed a number of basic principles, involving  including limiting the clarity of the document, no fancy wording and  its focus on stimulating the business environment and investment. The  provisions were fixed in the Concept to documents, but they were  successfully forgotten in the development of the Code - they  increased the tax burden on income tax and taxed dividends, revised  depreciation rates. Meanwhile, to stimulate investment, the tax  burden must be competitive in the region, including through indirect  taxes, the legislation should be accessible and not be at variance.  Thus, if today we want to reform the tax legislation, we must return  to the ideas fixed in the Concept to the code of October 2016. In  addition, we must guarantee a stable tax environment for business -  that is, consolidate mechanisms that will protect a potential  investor from frequent changes in tax legislation. 

POST A COMMENT
Input digits     


News
Minister: Until the end of 2019, Armenia may come close to the  inflation target of 4% (+ 1.5%)Minister: Until the end of 2019, Armenia may come close to the  inflation target of 4% (+ 1.5%)
Armenia strongly encourages tourism from the Middle Kingdom -  Implementation of UnionPay payment system is just around the cornerArmenia strongly encourages tourism from the Middle Kingdom -  Implementation of UnionPay payment system is just around the corner
Minister of Economy: According to the results of 2019, export from  Armenia will grow by about 7%.Minister of Economy: According to the results of 2019, export from  Armenia will grow by about 7%.
ID Bank redeemed its 5th tranche of USD bonds in the volume of $5mlnID Bank redeemed its 5th tranche of USD bonds in the volume of $5mln
Expert: The draft state budget of Armenia for 2020 does not create  the prerequisites for the implementation of the economic revolutionExpert: The draft state budget of Armenia for 2020 does not create  the prerequisites for the implementation of the economic revolution
Nikol Pashinyan: Double-digit growth of tourism sector will continue  in Armenia in 2020Nikol Pashinyan: Double-digit growth of tourism sector will continue  in Armenia in 2020
Economist: Underfulfillment of capital expenditures by the state  threatens economic recovery as early as in 2020-2021Economist: Underfulfillment of capital expenditures by the state  threatens economic recovery as early as in 2020-2021
Pashinyan:  Armenia will close the 2019 with economic growth within  7%, against 4.9% budgeted  Pashinyan:  Armenia will close the 2019 with economic growth within  7%, against 4.9% budgeted  
Three programs to increase the birth rate will be launched in Armenia  starting from 2020Three programs to increase the birth rate will be launched in Armenia  starting from 2020
Grape procurement process completed in Tavush region of ArmeniaGrape procurement process completed in Tavush region of Armenia
Deputy Foreign Minister of Chile: High-level cooperation with Armenia  in the economic sector is a necessityDeputy Foreign Minister of Chile: High-level cooperation with Armenia  in the economic sector is a necessity
Result exceeded expectations! Arshaluys Margaryan tells how Armenian financial authorities promoted Armenian Eurobonds in international marketsResult exceeded expectations! Arshaluys Margaryan tells how Armenian financial authorities promoted Armenian Eurobonds in international markets
Schneider Group Company proposes to hold a Schneider Group Company proposes to hold a "From Lisbon to  Vladivostok" conference   in Armenia
Vladimir Zharikhin does not exclude the possibility of opening  freight traffic through the Abkhaz railwayVladimir Zharikhin does not exclude the possibility of opening  freight traffic through the Abkhaz railway
At a forum in Chisinau on topic At a forum in Chisinau on topic "Strength of financing in national  currency", CBA representative introduced Armenian experience to  participants
Armenia and World Bank discuss further areas of cooperationArmenia and World Bank discuss further areas of cooperation
Ardshinbank: another step towards customerArdshinbank: another step towards customer
VTB Bank (Armenia) opened its 72nd branch -VTB Bank (Armenia) opened its 72nd branch -"Ararat"
EFSE provides multi-currency loan to ARARATBANKEFSE provides multi-currency loan to ARARATBANK
Executive Director of Armswissbank Gevorg Machanyan received the  honorary title  Executive Director of Armswissbank Gevorg Machanyan received the  honorary title  "Friend of Echmiadzin"
Statistical Committee: Production of alcoholic beverages grows in  ArmeniaStatistical Committee: Production of alcoholic beverages grows in  Armenia
In the GDP structure of Armenia, the service sector continues to lead  in terms of growthIn the GDP structure of Armenia, the service sector continues to lead  in terms of growth
EDB forecasts economic growth in Armenia at the end of 2019 at 6%EDB forecasts economic growth in Armenia at the end of 2019 at 6%
"Contour Global Hydro Cascade" company will make additional AMD 27.5  billion investment in  modernization of Vorotan Cascade of HPP 
In January-August 2019, the metallurgical industry of Armenia  launched a trend towards growthIn January-August 2019, the metallurgical industry of Armenia  launched a trend towards growth
Freight volume in Armenia in January-August 2019 decreased by 54%  with the growth of passenger transportation by 4.3%Freight volume in Armenia in January-August 2019 decreased by 54%  with the growth of passenger transportation by 4.3%
Revenues of Armenia`s communications sector in January-August 2019  accelerated growthRevenues of Armenia`s communications sector in January-August 2019  accelerated growth
TPL system in Armenia to use digital technologiesTPL system in Armenia to use digital technologies
EBRD to provide EUR 4.6 million grant to Armenia to continue Gyumri  city road rehabilitation programEBRD to provide EUR 4.6 million grant to Armenia to continue Gyumri  city road rehabilitation program
Aluminum foil production declines in ArmeniaAluminum foil production declines in Armenia


Exchange rates
14.10.2019
RUB7.420.00
USD476.44-0.29
EUR525.850.49
GBP598.272.21
CAD360.341.06
JPY44.05-0.04
CNY67.37-0.03
CHF478.791.15


Experts
Head of PSRC: Whatever the agreement, the domestic tariff is  dependent on the price at the borderHead of PSRC: Whatever the agreement, the domestic tariff is  dependent on the price at the border
IMF: Armenia needs to achieve sustainable inclusive growthIMF: Armenia needs to achieve sustainable inclusive growth
Artur Atoyan: Problems of fish farmers are solved by the communist  method, that is, they are not solved at allArtur Atoyan: Problems of fish farmers are solved by the communist  method, that is, they are not solved at all
HSBC Bank Armenia digitalizes cooperation with retail clients HSBC Bank Armenia digitalizes cooperation with retail clients 
AmRating agency in cooperation with European Rating-Agentur Expert RA  GmbH has issued regular research on Armenia`s banking systemAmRating agency in cooperation with European Rating-Agentur Expert RA  GmbH has issued regular research on Armenia`s banking system
Yulia Ustyugova: Armenia can get access to IMF “insurance line”Yulia Ustyugova: Armenia can get access to IMF “insurance line”
Armand Arton: The question whether citizenship should be granted in  return for investments is rather rhetoricalArmand Arton: The question whether citizenship should be granted in  return for investments is rather rhetorical
Former head of the Ministry of Finance: <Confrontation> with Lydian may cost much to ArmeniaFormer head of the Ministry of Finance: with Lydian may cost much to Armenia
Vardan Aramyan: It will be unreasonable if the government goes to revise the allowable national debt ceiling in GDPVardan Aramyan: It will be unreasonable if the government goes to revise the allowable national debt ceiling in GDP
HSBC Bank Armenia increases efficiency and focuses on digital servicesHSBC Bank Armenia increases efficiency and focuses on digital services
Bulgarian Minister: The level of Armenian-Bulgarian economic  cooperation is still unsatisfactoryBulgarian Minister: The level of Armenian-Bulgarian economic  cooperation is still unsatisfactory
Expert: Recruitment market in Armenia from the point of view of  supply and demand is sleepingExpert: Recruitment market in Armenia from the point of view of  supply and demand is sleeping
Expert: Despite the adequacy of Armenian banks` capitals, the  opportunities for its optimal use are severely limitedExpert: Despite the adequacy of Armenian banks` capitals, the  opportunities for its optimal use are severely limited
Association of Organic Agriculture is being created in ArmeniaAssociation of Organic Agriculture is being created in Armenia
Pailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not changePailak Tadevosyan: Governments change in Armenia, but taxation  approaches do not change
Rouben Indjikian: Everyone should follow the established unified and fair rules of the gameRouben Indjikian: Everyone should follow the established unified and fair rules of the game
Mher Arakelyan:  Armenia`s payment business has great prospectsMher Arakelyan:  Armenia`s payment business has great prospects
Rating-Agentur Expert RA GmbH and AmRating issued an industry report  on Armenia`s banking systemRating-Agentur Expert RA GmbH and AmRating issued an industry report on Armenia`s banking system
Igor Nazaruk: Each planted sprout has the right to a successful prospect if it is cherished and taken care ofIgor Nazaruk: Each planted sprout has the right to a successful prospect if it is cherished and taken care of
Ara Khzmalyan: Armenia is comfortable to Russian touristAra Khzmalyan: Armenia is comfortable to Russian tourist

Search by date

Government Bonds

Issue volume

10 billion

Volume of T-bills for placement

200 million

Volume of submitted competitive applications

200 million

Volume of satisfied bids

200 million

Yield at cut-off price

 5.8314%

Maximum yield

 5.8314%

Мinimum yield

 5.8314%

Weighted average yield

 5.8314%

Number of participants

2

The maturity date of T-bills

03.02.2020

ArmEx

 

СПРОС (Покупка)

USD

Средневзв. Цена

482,00

ПРЕДЛОЖЕНИЕ (Продажа)

  USD

Средневзв. Цена

-

СДЕЛКИ

USD

Цена откр.

482,00

Цена закр.

482,00

Мин. Цена

482,00

Макс. Цена

482,00

Ср/взв. Цена

482,00

-0.16

Кол-во сделок

1

Объем (инвал.)

200 000

0бъем (драм)

96 400 000

Commented
$ 270 Million to be invested in the construction of the first  skyscraper in Yerevan$ 270 Million to be invested in the construction of the first  skyscraper in Yerevan
The AGBU Women Entrepreneurs Program Launched in Artsakh: FRUITFUL  ARMENIA Foundation is the partnerThe AGBU Women Entrepreneurs Program Launched in Artsakh: FRUITFUL  ARMENIA Foundation is the partner
Forecast: Armenia has good prospects for expanding its presence in  the Polish marketForecast: Armenia has good prospects for expanding its presence in  the Polish market
Armenian government`s delegation headed by Prime Minister will take  part in the St. Petersburg International Economic Forum on June 6-7Armenian government`s delegation headed by Prime Minister will take  part in the St. Petersburg International Economic Forum on June 6-7
Concessionaire of Zvartnots International Airport promises to become  one of the best operators in the worldConcessionaire of Zvartnots International Airport promises to become  one of the best operators in the world
Arthur Javadyan: Central banks are not responsible for economic  growthArthur Javadyan: Central banks are not responsible for economic  growth
Forecast: Electricity exports to the Middle East through Iran are a  key component of Armenia`s geo- economic strategyForecast: Electricity exports to the Middle East through Iran are a  key component of Armenia`s geo- economic strategy
ArmInfo IC: In Armenia,  CMTPL loss ratio increased up to 64.5% in Q1  2019ArmInfo IC: In Armenia,  CMTPL loss ratio increased up to 64.5% in Q1  2019
From January 1, 2020, the cost of customs clearance of cars from  non-EEU countries in Armenia will increase by at least 4-5 fold:  whether the market for used cars is going upFrom January 1, 2020, the cost of customs clearance of cars from  non-EEU countries in Armenia will increase by at least 4-5 fold:  whether the market for used cars is going up
Overdue loans accelerate growth in banking system of ArmeniaOverdue loans accelerate growth in banking system of Armenia
RA Prime Minister: European Union is not ready to finance 100% of  development programs implementation in ArmeniaRA Prime Minister: European Union is not ready to finance 100% of  development programs implementation in Armenia
Converse Bank offers online loans at a low effective interest rateConverse Bank offers online loans at a low effective interest rate
Renco company will attract additional shareholders and partners to  the project of building a new thermal-power plant in ArmeniaRenco company will attract additional shareholders and partners to  the project of building a new thermal-power plant in Armenia
T.Avinyan: The Government is open for cooperation and encourages  active dialogue and interaction in all areas T.Avinyan: The Government is open for cooperation and encourages  active dialogue and interaction in all areas 
Agreement on construction of a new unit with combined gas cycle  signed in YerevanAgreement on construction of a new unit with combined gas cycle  signed in Yerevan
Veolia Jur: Regulatory charges are false and unfoundedVeolia Jur: Regulatory charges are false and unfounded
Armenian Prime Minister: We are gaining momentum for economic takeoffArmenian Prime Minister: We are gaining momentum for economic takeoff
Through the mobile banking application of Ardshinbank you can get a  loan in seconds.Through the mobile banking application of Ardshinbank you can get a  loan in seconds.
By the end of 2018, By the end of 2018, "Galburdjian Group" will launch the production of  sesame oil in Armenia
Expert: Armenia has a problem with effective use of water resources,  rather than small hydropower stationsExpert: Armenia has a problem with effective use of water resources,  rather than small hydropower stations
Investment forum Investment forum "Energy Week 2018" to be held in Armenia
Expert: It is necessary to start implementing the program for the  construction of a new nuclear unitExpert: It is necessary to start implementing the program for the  construction of a new nuclear unit
The Armenian government suggests raising the minimum pension by 60%The Armenian government suggests raising the minimum pension by 60%