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ARMENIAN SMALL BUSINESS DOESN'T LIKE TAX LAW
Vestnik Kavkaza, Russia
Feb 6 2015
6 February 2015 - 1:04pm
By Vestnik Kavkaza
Protests by several hundred merchants of flea markets took place
in Yerevan. They demanded cancellation of the Law on Turnover Tax
from the government. The authorities didn't give a clear response,
and the protesters stated that they intend to ignore the new law.
According to amendments which were made in summer 2014, the turnover
tax is decreased for small to medium-sized business (to 58 million
drams, i.e. $110 thousand) from 3.5% to 1%. At the same time,
merchants should present documents on turnover to tax services,
including information on remaining products and commercial invoices.
Otherwise, the law requires fees and a 5% tax to be applied for
abusers.
The law was due to begin its operation on October 1st 2014. However,
because of mass protests, its launch was delayed till February
1st 2015, so that economic entities could be ready to work under
the new conditions. However, the day before February 1st new mass
protests began. Representatives of small and medium-sized business
(SMB) expressed their concern about the prospects of regular checks
by tax services. Businessmen are sure that the new order will lead
to extra expenditures and negatively influence their small incomes;
and the main thing is, it would encourage tax pressure. According to
Mikael Melkumyan, an MP from Prosperous Armenia, following bureaucratic
procedures and regular tax checks will destroy SMB.
Another problem is presenting commercial invoices on supply goods,
i.e. information on major businessmen.
Representatives of the ruling Republican Party say that flea market
merchants are not interesting to the government as tax payers, and
the law is aimed at revealing (by documents on supply goods) major
businessmen who hide their revenues. According to flea market workers,
if the authorities want to take major taxpayers to the tax space,
they shouldn't do it at the expense of SMB.
Thus, the new law requires a mechanism of taking major businessmen
who don't pay taxes from the "shadows". The government believes that
presenting the necessary documents by small business will encourage
legalization of the revenues of major entrepreneurs. At the same time,
the mechanism is unlikely to work under the current management system
in Armenia.
Firstly, major businessmen often present no documents to
representatives of SMB; and after launching the new law, they will
stop doing it at all, as commercial invoices contain information on
their indirect revenues. Secondly, the current authorities of Armenia
support big business and act according to its interests. From this
point of view, their desire to reveal major taxpayers who stay in
the shadows by putting pressure on SMB looks strange.
"Today Armenia has a classic model of the shadow economy: big business
which stays in the shadows uses the patronage of the government. The
authorities are well aware about major businessmen who hide their
revenues, but instead of taking them into the tax space, they suppress
SMB," said Vaagan Khachatryan, an expert on economic issues.
Moreover, strengthening of pressure on SMB by the tax services
objectively leads to a worsening of SMB working conditions; it may
result in the losses of thousands of jobs.
According to Gagik Makaryan, the head of the Union of Employers
of Armenia, the new law makes representatives of SMB change their
activities; but they will have nothing to do, as the government
doesn't provide opportunities for this.
Many experts are sure that under the current crisis situation the
government shouldn't make amendments to the Tax Code, even if the
amendments are aimed at taking business from the shadows. The new law
is unacceptable, as SMB solves the problem of job creation rather than
dealing with budget problems. Moreover, to legalize the revenues of
big business, simpler mechanisms can be used.
On February 2nd at a meeting with Premier Ovik Abramyan,
representatives of the parliamentary opposition presented a package
of corrections to the law. It is based on a free-will principle which
requires business activity either within 3.5% of turnover tax or 1%
of turnover tax. The government intends to consider the opposition's
proposals. What the result of the process will be is not clear, but
it is obvious that the problem needs to be solved finally rather than
postponed for a while.
http://vestnikkavkaza.net/articles/society/65889.html
From: A. Papazian
Vestnik Kavkaza, Russia
Feb 6 2015
6 February 2015 - 1:04pm
By Vestnik Kavkaza
Protests by several hundred merchants of flea markets took place
in Yerevan. They demanded cancellation of the Law on Turnover Tax
from the government. The authorities didn't give a clear response,
and the protesters stated that they intend to ignore the new law.
According to amendments which were made in summer 2014, the turnover
tax is decreased for small to medium-sized business (to 58 million
drams, i.e. $110 thousand) from 3.5% to 1%. At the same time,
merchants should present documents on turnover to tax services,
including information on remaining products and commercial invoices.
Otherwise, the law requires fees and a 5% tax to be applied for
abusers.
The law was due to begin its operation on October 1st 2014. However,
because of mass protests, its launch was delayed till February
1st 2015, so that economic entities could be ready to work under
the new conditions. However, the day before February 1st new mass
protests began. Representatives of small and medium-sized business
(SMB) expressed their concern about the prospects of regular checks
by tax services. Businessmen are sure that the new order will lead
to extra expenditures and negatively influence their small incomes;
and the main thing is, it would encourage tax pressure. According to
Mikael Melkumyan, an MP from Prosperous Armenia, following bureaucratic
procedures and regular tax checks will destroy SMB.
Another problem is presenting commercial invoices on supply goods,
i.e. information on major businessmen.
Representatives of the ruling Republican Party say that flea market
merchants are not interesting to the government as tax payers, and
the law is aimed at revealing (by documents on supply goods) major
businessmen who hide their revenues. According to flea market workers,
if the authorities want to take major taxpayers to the tax space,
they shouldn't do it at the expense of SMB.
Thus, the new law requires a mechanism of taking major businessmen
who don't pay taxes from the "shadows". The government believes that
presenting the necessary documents by small business will encourage
legalization of the revenues of major entrepreneurs. At the same time,
the mechanism is unlikely to work under the current management system
in Armenia.
Firstly, major businessmen often present no documents to
representatives of SMB; and after launching the new law, they will
stop doing it at all, as commercial invoices contain information on
their indirect revenues. Secondly, the current authorities of Armenia
support big business and act according to its interests. From this
point of view, their desire to reveal major taxpayers who stay in
the shadows by putting pressure on SMB looks strange.
"Today Armenia has a classic model of the shadow economy: big business
which stays in the shadows uses the patronage of the government. The
authorities are well aware about major businessmen who hide their
revenues, but instead of taking them into the tax space, they suppress
SMB," said Vaagan Khachatryan, an expert on economic issues.
Moreover, strengthening of pressure on SMB by the tax services
objectively leads to a worsening of SMB working conditions; it may
result in the losses of thousands of jobs.
According to Gagik Makaryan, the head of the Union of Employers
of Armenia, the new law makes representatives of SMB change their
activities; but they will have nothing to do, as the government
doesn't provide opportunities for this.
Many experts are sure that under the current crisis situation the
government shouldn't make amendments to the Tax Code, even if the
amendments are aimed at taking business from the shadows. The new law
is unacceptable, as SMB solves the problem of job creation rather than
dealing with budget problems. Moreover, to legalize the revenues of
big business, simpler mechanisms can be used.
On February 2nd at a meeting with Premier Ovik Abramyan,
representatives of the parliamentary opposition presented a package
of corrections to the law. It is based on a free-will principle which
requires business activity either within 3.5% of turnover tax or 1%
of turnover tax. The government intends to consider the opposition's
proposals. What the result of the process will be is not clear, but
it is obvious that the problem needs to be solved finally rather than
postponed for a while.
http://vestnikkavkaza.net/articles/society/65889.html
From: A. Papazian