1 / 25

On December 14, the NA Standing Committee on Economic Affairs initiated parliamentary hearing. The amendments being designed in the Tax Code and the enclosed laws, which relate to the introduction of the universal declaration system of the physical entities’ incomes in our country were in core of the discussions. Let us remind that the parliament has already passed the legislative package in the first reading.

In his welcoming speech, the Deputy Chair of the NA Standing Committee on Economic Affairs Babken Tunyan touched upon the blocking of Stepanakert-Goris highway by the Azerbaijanis, and in response to the viewpoints and criticism that such issue is under discussion in this situation, reminded the attendees that a decision was made about the day of holding the hearing two weeks ago. According to him, the issue of Lachin corridor is in the centre of attention of parliament at this moment.

As Babken Tunyan has assessed, such debates are not aim in itself: all sounded opinions and proposals will be debated until the second reading.

Detailing the goals of the introduction of the system, the RA Deputy Minister of Finance Arman Poghosyan noted that the first is the formation and the establishment of the accounting system of the personified physical persons, which will give opportunity to more exactly orient the real beneficiaries of the profile policy.

The next goal is to create social motivations for presenting declarations on behalf of the introduction of the application in the international practice, the so called, system of social expenditures or social credits. According to the Deputy Minister, the establishment of the system also will be an important contribution to the development of human capital, as the system will encourage the achievement of the educational and health services. For the first time, an attempt is made to turn from the taxation model of the individual, citizen into the very conservative taxation model, but at the same time with the emphasized steps the family taxation model: the person, the income taxpayer will be allowed to decrease from its taxation base not only his/her, but also the social, health and educational expenditures. In the beginning the Government will define the separate directions, amounts of the social expenditures, the format of the family members and the documenting rules of the expenditures, afterwards after certain time, having more stable regulations, they will be moved to a level of the Code.

As Arman Poghosyan evaluated, the introduction of the social expenditure system will also promote the declaration of the circulation of the realization in the educational, health spheres or real volumes of rendering services, as the citizens, requiring relevant accounting documents, will contribute to the decrease of the existing shadow turnover.

The next goal, as the Deputy Minister presented, is the strengthening of the tax paying culture among the public. The citizens should realize that they pay taxes, take part in the formation of the public resource and should be claimant in terms of being an addressee to the public goods being distributed from that public resources. A higher level of citizen-state relationship will be formed by the introduction of the system.

The next aim of the system introduction is the formation of the convenient tax environment and toolset: the information on the physical persons’ incomes and the paid taxes on their part for accounting by the tax body, as well as independently fulfilling the tax obligations on the citizens’ income tax. According to the Deputy Minister, there were types of incomes with the functioning regulations, which are subject to taxation, but in fact, the taxes were not carried out in the whole volume on their part on different reasons. According to Arman Poghosyan, the frequently functioning system for the citizens is not so convenient from the viewpoint of use.

To smoothly providing the introduction of the system it is proposed to carry out it during three successive years, beginning from 2023. The first year for declaration will be the year 2023, for which declarations will be presented in 2024. In 2023, declarants will be those holding public, state service and community positions prescribed by law on Public Service. The next group will be the notaries on personal incomes, afterwards – physical persons connected with entrepreneur units in this or that way. The next fgroup will be the income tax return beneficiaries, who receive incomes from the sources being outside Armenia. In 2024, this format will be added by hired employees and by persons fulfilling job with civil-legal contract or rendering services and the remaining resident citizens in the last year.

Speaking about the technical side or the solution of the system introduction, the Deputy Minister noted that the declarations will be drafted or pre-filled by the tax body on the basis of the information known to the tax body by the drafting moment. It is designed that this information will be automatically filled in the declarations, and every declarant physical person, entering into the system with his/her data, will see the declaration drafted on the basis of the information existing by that moment for him/her. An opportunity will be given to add and to review. In case of absence of necessity of making amendments and addenda the citizen only shall approve the declaration drafted for him/her.

Arman Poghosyan referred to two most important items: one relates to the declaration of receiving incomes for our citizens working abroad. As no increase of tax burden is envisaged by the initiative, by this logic review of tax burden is not envisaged on the incomes being received from the work abroad. “It is proposed to give opportunity not to submit a certificate on the taxes paid also abroad will not be required on the incomes being received from the work abroad up to 12 million AMD annually,” Arman Poghosyan added. It is expected that this opportunity will be given for the transitional period being designed after that. He underlined that after that in practice systems of self-working exchange systems of information between the tax bodies will be introduced: at least such process goes on in the format of the EAEU member states.

The participants were particularly interested in the principle of choosing the framework of the person presenting declaration. According to the Prime Minister, the framework of the declarants can be changed due to proposals. “If there will be such weighty argument, as a result of which, necessity of review of the participants of the first stage will arise, we are ready to discuss that,” He mentioned. Speaking about probability of failing, Arman Poghosyan underscored that everything is done for decreasing its probability and risk management. The participants also voiced the issue of introducing the system to the society and sufficiently informing about it. As the Deputy Minister assured, the citizen will face this reform minimum after one year for the first time. “We have one complete year, we have readiness to intensively work in order to successfully serve the introduction this system,” Arman Poghosyan added.

In their speeches the participants of the hearing in general are for the introduction of the system. AN opinion was sounded that it is not expedient, as there is flat income, and in that case consolidation is not possible, as a consequence of which, there will not be increase of incomes. A proposal was sounded to study the draft in case if we accept if our country will become tempting or vice versa in economic term. It was noted that the legislative package has not passed decent phase of debate. It was emphasized the tax reforms will be made in accordance with the principles of the Tax Code concept.

In his speech thanking the participants for taking part in this hearing, the Deputy Chair of the NA Standing Committee on Economic Affairs Babken Tunyan noted that it was professional, and it was very important. He underscored that introducing reform is incomparable during the debate period, and debating it in extraordinary regime is not the most desirable version, but this system has always been spoken. Regarding the issue if the system is ready for the introduction of the abovementioned reform, Babken Tunyan emphasized that that issue also bothers them. According to the Deputy Chair of the Committee, the system will not work immediately after the adoption of the draft law: there is still work to be done. Referring to the responsibility mechanisms, Babken Tunyan agreed that some provisions are subject to be debated. He mentioned that they will relate to the changes aimed at more mitigating the warning responsibility measures during the period from the first to the second reading.

As the Committee Deputy Chair said, in parallel with the digitalization process the mechanism of income declaration shall develop. “It means that at the stage, when the income declaration system will be introduced for everybody, it is implied that the digitalization level will reach to some sufficient level,” je noted. Babken Tunyan stressed that after taking the first step they will rectify the system with all concerned sides and will more improve it.

In his final speech the Deputy Minister of Finance Arman Poghosyan touched upon the raised issues, answered them. According to the Deputy Minister, all proposals will be decently debated: and part of them will be taken into consideration.