YEREVAN, February 19. / ARKA /. The new pension scheme effective in Armenia from January 1 this year is very likely to trigger the growth in the so-called ‘shadow’ employment, Gagik Makaryan, the chairman of the National Union of Employers told a news conference today.
He said when being recruited many people ask employers not to register them in order not to pay taxes and other mandatory payments.
Listing possible negative effects of the new pension reform, Makaryan said it is going to push the current unemployment rate of 17% up to 20%-23 %, as well as cause conflicts between employers and employees.
According to the latest data from the National Statistical Service, the unemployment rate in the third quarter of 2013 was 15.4 %, down 0.6 percentage points compared with the same period in 2012.
Makaryan said when the new pension scheme was being discussed he proposed that it be enforced only for civil servants or be postponed for consultations with employers, but his proposals were ignored by the authorities.
Armenia’s Constitutional Court suspended last month Article 76 of the new law, which provides for penalties for failed or delayed pension tax payments, and the third paragraph of Article 86, which obligates employed citizens to choose a pension fund, among other parts of the law. The Court says it will conclude the inquiry on March 28, 2014.
The constitutionality of the law was challenged by three opposition parties in the National Assembly — the Armenian National Congress, the Armenian Revolutionary Federation, and the Heritage Party — along with the usually pro-government Prosperous Armenia Party.
The new pension system requires that all Armenian citizens born after 1973 pay social security taxes equivalent to 5 percent of their monthly wages, which will be matched and doubled by the government. That money has to be deposited with private pension funds licensed by the government late last December. -0-