19 November, 2018 21:52

Armenia Could See a Spike in Alcohol and Cigarette Prices

Armenia’s government has proposed a bill to transition into a single income tax system. The draft bill from the Ministry of Finance was published on e-draft.am on November 15.

The Ministry has proposed to set the single tax rate to 23 percent starting July 1, 2019. Current taxation is based on income, with three different tiers set at 23 percent, 28 percent and 36 percent. With the proposed bill, everyone, no matter what their income, will pay 23 percent.

In addition, the proposed law will gradually restore the participation of citizens in the cumulative pension allocations program along with the reduction of the tax burden on individuals. This means that employees will pay 5 percent of their salary, in comparison to the 2.5 percent they pay now. In turn, instead of the government putting 7.5 percent into citizens' retirment, they will now put 5 percent.

According to the Ministry of Finance, "Studies show that the relatively high profit tax in our country hampers both foreign investment and improved levels of economic activity."

Along with these processes, the government wants to increase prices on a range of products. In particular, the Ministry wants to see an increase in the excise tax on cigarette products and alcoholic beverages, starting July 1, 2019.

The bill also proposes an increase in the minimum sale price of vodka and ethyl alcohol. The beer excise tax rate will also increase if the proposal is passed.

The scope of goods subject to higher taxation will also include a new, additional excise tax for products that have five or more grams of sugar in 100 grams of liquor.

Cars with high gas emissions will also face higher taxes. The Ministry of Finance proposed a revision to the environmental tax rate for vehicles with 301 and more horsepower, starting on January 1, 2020.

Earnings from betting games, including internet prize games, will face higher taxes as well. The Ministry recommends revising the taxation approaches on earnings from those industries after 2020.

The Ministry began a public poll regarding the proposed tax changes. According to the poll, 92 percent of respondents are against the proposed bill.  

To become law, the draft bill must be approved by the Government and then by the National Assembly of Armenia.

In Armenia, a new Tax Code came into effect in January 2018, during which the excise tax was raised. At that time, the head of the Way Out faction (“Yelk”), then-parliament deputy Nikol Pashinyan went out to the streets to protest against the rise of prices. "We demand tax cuts," said Nikol Pashinyan.

Story by Gevorg Tosunyan

Translated by Ani Paitjan