Expert: New Changes In Armenia’s Tax Area Can Enlarge Shadow Economy
01.11.2011,
16:29
New changes in Armenia’s tax area can give room for enlargement of shadow economy, Vazgen Safaryan, head of the Union of Armenia’s Domestic Manufacturers, said on Monday.
YEREVAN, October 31. /ARKA/. New changes in Armenia’s tax area can give room for enlargement of shadow economy, Vazgen Safaryan, head of the Union of Armenia’s Domestic Manufacturers, said on Monday.
He reminded journalists that revenue is projected at AMD 910 billion in the 2012 draft government budget, GDP at AMD 4.2 trillion and tax and duty revenue at AMD 732 billion
“To handle the tax revenue of AMD 732 billion, the government is trying to present a tax package and amendments in tax laws in an effort to add another 101 billion to the budget,” he said. “But this amount arouses deep concern on manufacturers’ side.”
Safaryan is convinced that the government is wrong in making such changes in a few days or a month before the end of the year.
“At least six months are needed to give time to economic entities for adjusting their economic functions to these tax changes,” he said.
According to preliminary figures, he said, changes first of all apply to social payments, which are enlarged from AMD 7,000 minimum to AMD 9,000.
“It is clear that this will create additional tension among economic entities… I think economic entities will be unable to put this change into practice immediately, and this can prompt them to shift to shady dealing,” Safaryan said.
He said that multi-degree approach is designed for that - over AMD 100,000, over AMD 500,000 and over one million drams.
“This scale could be viewed as a positive approach, since this is a progressive tax, but are our employers ready for this approach? I don’t think they are able to hail it,” the expert said.
He also said that some changes are made in the excise tax as well. In particular, excises on wine, brandy, beer and spirits will be equal to those on imported goods.
The government, he said, explain this by Armenia’s membership in the World Trade Organization.
“But there are problems, since we should create maximally favorable environment for domestic manufacturers to enable them to build up domestic industry’s output, create new jobs and enlarge exports,” Safaryan said.
He is convinced that the increased excise tax will strike at ordinary people, since entrepreneurs will hardly leave prices unchanged at the expense of their profits.
The head of the union also spoke on luxury tax. In particular, extra duties will be levied on imported expensive cars produced no earlier than three years ago with high-powered engines.
Besides, fixed payments for additional leased areas will be increased. “This mainly applies to supermarkets and will inevitable drive their prices up,” Safaryan said.
He also said that fines will be increased from AMD 150,000 to AMD 300,000, and for repeated offences to AMD 600,000.
He said that such sanctions will first of all strike hard at small businesses.
The expert voiced concern over new, 10-percent duty for export of metal raw materials. He said this will create additional problems for exporters.
He said that even without this restrictions Armenia imports 3.5 times more goods than exports.
He said it wouldn’t lessen shadow economy, and more than that – this can create a new “shadow”.
In his opinion, it is possible to collect additional AMD 101 billion by reducing the shadow segment and increasing the ratio taxes and duties to GDP at least by 2% from the current 17.36%.
“And the proposed approaches arouse concern, since they will enlarge shadow dealing and trouble small- and mid-scale businesses,” he said. “Their output and industrial capacity can shrink. There is a mere logic – intensification of tax pressure reduces tax area.” ($1 – AMD 378.58). –0—
He reminded journalists that revenue is projected at AMD 910 billion in the 2012 draft government budget, GDP at AMD 4.2 trillion and tax and duty revenue at AMD 732 billion
“To handle the tax revenue of AMD 732 billion, the government is trying to present a tax package and amendments in tax laws in an effort to add another 101 billion to the budget,” he said. “But this amount arouses deep concern on manufacturers’ side.”
Safaryan is convinced that the government is wrong in making such changes in a few days or a month before the end of the year.
“At least six months are needed to give time to economic entities for adjusting their economic functions to these tax changes,” he said.
According to preliminary figures, he said, changes first of all apply to social payments, which are enlarged from AMD 7,000 minimum to AMD 9,000.
“It is clear that this will create additional tension among economic entities… I think economic entities will be unable to put this change into practice immediately, and this can prompt them to shift to shady dealing,” Safaryan said.
He said that multi-degree approach is designed for that - over AMD 100,000, over AMD 500,000 and over one million drams.
“This scale could be viewed as a positive approach, since this is a progressive tax, but are our employers ready for this approach? I don’t think they are able to hail it,” the expert said.
He also said that some changes are made in the excise tax as well. In particular, excises on wine, brandy, beer and spirits will be equal to those on imported goods.
The government, he said, explain this by Armenia’s membership in the World Trade Organization.
“But there are problems, since we should create maximally favorable environment for domestic manufacturers to enable them to build up domestic industry’s output, create new jobs and enlarge exports,” Safaryan said.
He is convinced that the increased excise tax will strike at ordinary people, since entrepreneurs will hardly leave prices unchanged at the expense of their profits.
The head of the union also spoke on luxury tax. In particular, extra duties will be levied on imported expensive cars produced no earlier than three years ago with high-powered engines.
Besides, fixed payments for additional leased areas will be increased. “This mainly applies to supermarkets and will inevitable drive their prices up,” Safaryan said.
He also said that fines will be increased from AMD 150,000 to AMD 300,000, and for repeated offences to AMD 600,000.
He said that such sanctions will first of all strike hard at small businesses.
The expert voiced concern over new, 10-percent duty for export of metal raw materials. He said this will create additional problems for exporters.
He said that even without this restrictions Armenia imports 3.5 times more goods than exports.
He said it wouldn’t lessen shadow economy, and more than that – this can create a new “shadow”.
In his opinion, it is possible to collect additional AMD 101 billion by reducing the shadow segment and increasing the ratio taxes and duties to GDP at least by 2% from the current 17.36%.
“And the proposed approaches arouse concern, since they will enlarge shadow dealing and trouble small- and mid-scale businesses,” he said. “Their output and industrial capacity can shrink. There is a mere logic – intensification of tax pressure reduces tax area.” ($1 – AMD 378.58). –0—
