Tuesday, January 29 2019 15:13

ArmInfo.Starting from September 1, 2019, Armenia plans to switch to a flat income taxation system, which, regardless of the amount of wages, will be set at 23%. Deputy Minister of Finance of Armenia Arman Poghosyan told ArmInfo correspondent about this.

It should be noted that the draft amendments "On amendments and  additions to the Tax Code of the Republic of Armenia", submitted by  the Ministry of Finance of Armenia on the single portal of legal acts  of e-draft.am in November 2018, provided for the transition from July  1, 2019.

Currently, Armenia has the following taxation scale: those who  receive a monthly income of up to 150 thousand drams pay 23%, from  150 thousand to 2 million drams - 28%, and more than 2 million drams  - 36%.

As the financial authorities of the country recognize, the problem is  that the effective income tax rate of 25.1-25.2% is quite high, and  therefore negatively affects the competitiveness of the national  economy, export volumes, does not contribute to economic growth and  reduce poverty in the country. Moreover, a large tax burden on the  income tax line leads to inadequate declaration of real income. As a  result, as the Ministry of Finance states, the bulk of the declared  income is concentrated in the "weight category up to 150 thousand  drams".

At the same time, as the studies of those responsible for the field   showed, the tax burden on the profit tax in Armenia is relatively   high, which puts obstacles in the way of attracting foreign   investments into the country. Taking this into account, including   following the world trends, the Armenian government in its program of   activities fixed the norm on reducing the tax burden on direct taxes  (income tax, incomes of individuals) and a certain increase in   indirect (VAT, excise and a number of duties).  As the Deputy Finance  Minister said, if everything goes according to the plan, from  September 1, 2019, the government intends to switch  to a flat  taxation system on the income tax line - to establish a tax  of 23%  regardless of the salary. Further,  until 2023, the rate will be  reduced to 20% (from January 1, 2020 -  22%, from 2021 - at the level  of 21%, in 2022 - 20.5%, and from 2023 - 20%). In the case of the  transition to new adjustments already in 2019, the tax losses of the  state treasury are estimated at 27.5 billion drams. Further, each  percent, other things being equal, will cost the state budget 12.5  billion drams.

From 2020 to 2022 the government also offers equal rates of income  tax and dividend tax for citizens of Armenia and foreigners, setting  them also at the level of 23% (from 20% to 18% income tax and from  10% to 5% dividend tax - Ed.note). The loss in terms of tax revenues  of the budget in case of establishing equal conditions for residents  and non-residents on the tax on dividends will be 1-1.3 billion  drams.

In parallel, the government provides for a gradual return to the  previous conditions of the mandatory pension system before 2023.  Thus, from January 2020, the monthly mandatory payments on them by  the working citizen will be 3.5% (from 6.5% with state co-financing)  instead of 2.5% from July 1, 2018 from the size of the salary and  7.5% from state treasury. Already in 2021, working citizens will  monthly give 4.5% of their salary to the mandatory pension fund, and  from 2022 - all the5%.  The Ministry of Finance also proposes to fix  that the pensions of residents of individuals are not subject to  taxation in Armenia.  As the representative of the Armenian Ministry  of Finance pointed out, the financial institution is inclined to  believe that the current draft, in the form in which it was posted on  e-draft.am on January 23, is final.  Back in November 2018, when the  project was presented in its previous form, it passed a long way of  public and departmental discussions, but the process cannot be  endless. Otherwise, problems will remain unresolved. "In our opinion,  this is the final stage. The document will stay on the portal until  February 7, after which it will be summarized and submitted to the  government," said Deputy Finance Minister Arman Poghosyan.