Excise Tax Increase Could Reduce Domestic Wine and Tobacco Market in Armenia – Tavadyan

 
YEREVAN, July 16. /ARKA/. Increasing excise tax rates on wine, cigarettes, and e-cigarettes could lead to a reduction in domestic consumption of these products and increase the tax burden on producers, according to Aghasi Tavadyan, founder of tvyal.com.

On July 3, the National Assembly of Armenia approved amendments to the Tax Code providing for changes in excise tax rates for 2027–2029, which will come into effect on February 1, 2027. Excise taxes on wine, cigarettes, and vapes will increase.

As Tavadyan noted in an interview with ARKA, the main purpose of the excise tax is to limit the consumption of goods considered harmful to health or undesirable from a public policy perspective.

"However, there is a more fundamental issue that requires discussion. For the Armenian government, tax collection is the primary performance indicator. "That is, the government strives to increase tax collection annually and raise the tax-to-GDP ratio to the planned 25%," he said.

According to the expert, while tax revenues grew after 2018, including through businesses coming out of the shadow economy, employee registration, and increased transparency of corporate operations, recently, tax collection growth has increasingly been achieved through an increase in the tax burden.

"For example, at the beginning of 2025, the turnover tax was raised from 5% to 10%, which caused problems. Land tax and property tax were also increased, and now the excise tax will be increased," he said.

In this regard, Tavadyan emphasized that winemaking and tobacco production are key manufacturing and export sectors for Armenia.

Therefore, the expert believes, balance is important, as is the understanding that short-term benefits from tax collection may not correlate with tobacco and wine production as important export sectors. According to Tavadyan, raising excise taxes will lead to a contraction of the domestic market. However, he did not rule out the possibility of holding "wine days"—a fairly developed service market, where wine and winemaking make up a significant portion.

Regarding the foreign market, the expert does not see any major problems in terms of exports, explaining that exporting countries, particularly those in the Middle East, determine their own excise taxes.

Overall, the expert is concerned not so much about the excise tax increase itself, but rather about the trajectory of certain tax increases.