Armenian Government Eyes Changes to Controversial Tax Reform Bill

YEREVAN – The Armenian government is discussing the possibility of making major changes to a controversial tax reform bill that was passed by the country’s parliament in June.

If passed, the bill would increase the income tax for those with a monthly salary over USD 250 from 26 per cent to up to 33 per cent, while decreasing the income tax for those earning USD 4,200 or more from 36 per cent to 33 per cent and from 24.4 per cent to 23 per cent for those earning less than USD 250, RFE/RL reported.

Armenia’s main opposition parties and several deputies from the ruling Republican Party have joined forces with business owners in opposing the bill, saying that it would profoundly cripple the private sector by hindering the growth of small and medium-sized businesses.

In response to the openly hostile pushback by the bill’s opponents, Prime Minister Hovik Abrahamyan has vowed to amend the bill ahead of its second reading in September.

Abrahamyan added that if the amended bill passes in its second reading, the reforms would be gradually phased in over a period of three to five years.

Tax collection remains a thorny issue in Armenia despite significant improvements in recent years. The total amount of tax revenue collected in the country still only accounts for one-fifth of Armenia’s Gross Domestic Product – far behind its neighbors Georgia, Turkey and Azerbaijan.

A deep-rooted culture of tax evasion and systemic corruption contribute to the country's poor track record when it comes to tax collection.

In its June report, the IMF sharply criticized Armenia’s government for not doing more to crack down on those who avoid paying their taxes and advised President Serzh Sargsyan’s government to implement major structural reforms that including higher tax collections.

By Nicholas Waller

Photo: RFE/RL