Pension Tax?: Government-proposed amendments to controversial law draw renewed criticism

While citizens not wishing to remain in the new pension system continue submitting withdrawal applications to their employers, the government is already discussing the issue of introducing the so-called targeted social payments as a replacement of the current pension contributions. This payment will be a tax and in case of evading it people will face responsibility.

The government is thus trying to save the pension reform, which has almost been brought down under the pressure of the Dem.am civil movement and four non-governing parties.

As part of their struggle the forces opposing the reform applied to the Constitutional Court, which on April 2 decided that portions of the Law on Funded Pensions were unconstitutional, giving the government until the end of September to bring the legislation in conformity to the country’s basic law.

The group working on amendments last weekend suggested replacing the mandatory payments with targeted social payments.

In particular, the proposed tax will be charged from employees’ salaries. It will not exceed 25,000 drams (about $60) for employees getting more than 500,000 drams’ salaries, even if the salary is higher, the state’s contribution will be 25,000 drams. The working group recommends that the employer should cover the social payment of those who receive the minimum wage, due to which the rights of people getting the minimum wage will not be violated.

CivilNet economic analyst Armenak Chatinyan says these approaches are not new as he still in March predicted that the government would consider such an alternative.

“The government document on amendments drafted in March and kept top secret presented almost all the mechanisms that are currently being offered by the working group,” he says.

Thus, according to Chatinyan, the working group, in fact, suggests “cosmetic” changes to the law, as employees will still be required to make pension-related contributions.

“But while under the system recognized as unconstitutional the funds transferred to the individual accounts of employees were considered to be their property, under the system proposed by the government today these sums will no longer be employees’ property.”

“The problem is that the planned targeted social payment by its nature is a type of tax and will be entered into the state budget, and only after that will the state transfer the sum to the account of an individual citizen. At any moment the state may withdraw the funds from the citizen’s account and the citizen will have no grounds to complain,” says the analyst, according to CivilNet.

After becoming prime minister in April Hovik Abrahamyan has continuously promised to carry out the pension reform that would meet the interests of all layers of society. In response to complaints from employees, especially those involved in the public sector, that they are compelled to remain within the system, Deputy Prime Minister Armen Gevorgyan said at a recent National Assembly session that they would be consistent in ensuring proper investigation of all claims.

Meanwhile, Dem.am does not regard the government promises as credible. Activist of the pressure group David Manukyan told ArmeniaNow that after the latest initiative of the government their campaign will gain momentum and continue with fresh vigor.

“Because this has nothing to do with what we have demanded,” the activist explained.