Stimulating Exports: New Government-drafted bill sparks debate in parliament

Heated debate unfolded in the Armenian parliament this week around a new government-drafted legislation cutting dramatically the corporate profit tax rates for large exporters.

Under the original bill submitted to the National Assembly manufacturers exporting goods worth at least 50 billion (about US$105 million) annually will not have to pay a 20-percent tax, but will be allowed to pay only a 2-percent profit tax. This, the government believes, will stimulate export growth.

After two days of debate at the National Assembly it was decided to hold the vote on the draft law in early March.

Meanwhile, critics of the initiative point to the fact that today there is only one business in Armenia that can become a beneficiary of this legislation and it is in the mining industry. But the government by the proposed law excludes the mining industry from the list of possible beneficiaries.

The government says the law in fact holds out new possibilities for investments in Armenia with the purpose of organizing exports.

Orinats Yerkir MP Mher Shahgeldyan, however, sees risks for local producers if the law is adopted. “The export of Armenian products becomes dependent on one or two offices,” he said. “It concerns the economic security of the country.”

Opposition lawmakers argue that the passage of the bill will create a situation when investors from abroad may come and monopolize all exports, while such decisions will restrict others.

“The so-called opportunity cost is increasing,” said Hrant Bagratyan, a former prime minister now affiliated with an opposition parliamentary faction. Bagratyan finds that such tax advantages should be given not only to large exporters but to all exporting businesses.

Under the proposed legislation, for the tax privileges to be granted to them exporting companies will also have to have a government-approved export program and should not be receiving revenues in the territory of Armenia. This measure is aimed at ensuring that local companies do not unite in order to become eligible for the tax advantages.

Deputy Finance Minister Vakhtang Mirumyan said during a press conference that the changes will exclusively concern investments made from abroad.

“In other words, it will apply to the businesses that will make investments in the territory of Armenia and will export the manufactured goods,” the official said, stressing that the new legislation will concern only new investments.

Earlier, Prime Minister Hovik Abrahamyan said: “This is one of the unconventional government steps aimed at stimulating exports.” According to him, greater exports would mean more jobs and other tax revenue.