Expert: new income tax model to lessen shady dealing in Armenia at ordinary people’s expense

YEREVAN, September 19. /ARKA/. Vazgen Safaryan, head of the Union of Domestic Commodity Producers, thinks that the new income tax model to be introduced in Armenia in the beginning of the next year will lessen shadow economy, mainly at the expense of ordinary people.

On Wednesday, speaking at a news conference, he said that employers will no longer be interested in underreporting their real income. 

Safaryan said the government should work out special mechanisms forcing employers to raise their personnel’s salaries. 

He said the new model will have absolutely no impact on large employers, “who never paid taxes and will never pay them”. 

Safaryan also said that the new model is designed to enlarge the share of direct taxes in the country’s tax revenue. 

“However, to increase this share there was no need to take this road - it would be better to create new jobs and to raise salaries instead,” he said adding that this move is no more than a mere cosmetic measure, which demonstrates of income tax revenue enlargement instead of spurring economic development.

The amended law on income tax will take force on January 1, 2013. 

Under the amended law, all social payments will be deducted from employees’ salaries, while now the major portion of the monthly payment is carried out by employer.

 

Employers, on their side, ought to raise their employees’ salaries to preserve their actual income. 

Earlier, Labor and Social Security Minister Artem Asatryan downplayed speculations that after the amended law on income tax enters into force from January 1, 2013 the employers will cut their personnel salaries. He said the changes are part of a pension reform.

Explaining the essence of the amendment, he said that now if an employer pays a worker 100,000 dram salary, he/she has to pay also 19,000 drams as social payments,” he said. “Besides, another 3000 drams are deducted from a worker’s salary as social payments in addition to 6,450 dram income tax. All in all, 9,450 drams are deducted as taxes and the net income is 90,550 drams.”

From January 1 all these components are combined into a single income tax and are deducted from the worker’s salary, but the employer will have to raise worker’s salary by 19,775 drams.

Actually, the size of salary will not change - in fact it may be raised by 775 drams. The minister said it's a small amount, given parallel measures designed to simplify procedures for employers’ reporting. -0-