Victims Will Suffer, Winners Will Benefit: The Outcome of Tax Code Amendments

According to the "168 Hours" newspaper, the National Assembly yesterday approved the draft law on amendments to the Tax Code in the second reading and almost unanimously, with 114 votes in favor and 1 abstention. Opposition factions also voted in favor. With the new Tax Code, businesses with an annual turnover of up to 115 million AMD will pay turnover tax, avoiding value-added tax.

The most debated change in the new Tax Code is the flat income tax rate. Currently, there are three income tax brackets: 23%, 28%, and 36%, which correspond to earners of up to 150,000 AMD, between 150,000 and 2 million AMD, and above 2 million AMD, respectively. The government proposes to tax everyone equally at 23%, and from 2020, the rate will drop to 20%.

However, Ashot Khurshudyan, an expert from the International Center for Human Development and an economist, considers this change risky: "If you adopt such a model, it implies expecting little from the state. The budget is shrinking. Many social responsibilities are being shifted onto businesses and employees, leaving them to fend for themselves. We have expectations in healthcare and social sectors. Today, the shadow economy has somewhat diminished, and a lot of money has entered the budget, but this is temporary, not everlasting, and it may lead to serious problems. This change will impact those earning up to 200,000 AMD. The class that earns slightly more could see improved circumstances, while those earning up to 150,000 AMD might face a deterioration in their situation. We could lose those earning up to 150,000 AMD. You can ask various people how much their salaries increased since February 1; those earning up to 150,000 AMD will respond with zero, whereas those above that threshold will report a good increase."

For more details, refer to today’s issue of the newspaper.