Sales Tax Law Controversy: Key opposition factions evaluate latest amendments as positive

Under public pressure the Government of Armenia twice delayed the sales tax law and now presented new draft changes to the National Assembly, agreeing to make certain compromise after complaints from businessmen.

Specifically, before the recent changes businessmen paid a 3.5-percent sales tax, while the government suggests paying 1 percent provided they submit sales-related documentation to tax authorities, otherwise the tax will be 5 percent.

Thus, small and medium entrepreneurs, who will not be able or willing to work with big businesses in conditions of extra paper work will already have to pay 1.5 percent more taxes, those who will – 2.5 percent less.

“The idea was to create a motivation for small businesses to obtain documentation and gain an opportunity of making more profit for their families,” Minister of Economy Karen Chshmarityan said during a Thursday parliament meeting.

The other change is related to almost twofold increase of the sales tax threshold – 113.4 million AMD (more than $235,000) as compared to current 58.3 million AMD, which, according to the minister, is conditioned by the calculations, according to which through 2008-2015 the inflation made 63 percent.

“Thus, the first argument for which we must reconsider this threshold stems from this approach, the second – from providing profit.”

It is noteworthy that on Thursday the executive declined the bill presented by the non-governmental forces, and representatives of the movement fighting against the law, however, say that very few will manage to receive documentation from big businesses and they will continue the fight.

It is not yet clear, though, which political force will support them, because, for example, the Armenian National Congress (ANC) and the Prosperous Armenia Party (PAP) evaluate this new amended version as positive.

ANC faction MP Aram Manukyan, for instance, thinks that a concept was changed in the bill and an alternative has been included, which did not exist before, thus, now businessmen themselves will decide choosing upon working with or without documentation.

The executive’s new approach pleased the PAP as well, since it almost completely included their suggestions.

“We are satisfied. Let’s suppose we have withdrawn our initiative. I was going to withdraw it myself, because it is of no actual meaning any more. If we had three demands, 2.5 of them are realized, and 0.5 – not, shall we oppose because of that?” PAP MP Mikayel Mekumyan told RFE/RL’s Armenian Service. The only problem in the new bill, nevertheless, according to MPs, is the absence of sector-specific approach.

“They [traders] say that those working in the sector of gold, construction materials or clothes are in somewhat different conditions, it is much harder for them to submit documentation,” ANC faction head Levon Zurabyan said in parliament.

According to the Minister of Economy, the new approach is only for the fields of production and services, and the field of gold and gold products will still be discussed in the NA during subsequent readings of the bill.