By adopting the new Law on Turnover Tax, the Armenian Government has actually toughened the tax administration of small and medium enterprises again, MP from the Prosperous Armenia Party (PAP) Faction Mikayel Melkumyan said at today's press conference. According to the law, the document control has become compulsory for these entities.
He said that in case of compulsory document control the tax audits of SMEs will become inevitable some time, because the given law aims to reveal the real turnover of the enterprises and, consequently, to increase the tax revenues. "If these revenues do not grow, the tax officials will have to check the documents on turnover of the economic entities", he said.
Melkumyan added that today the ban on different types of inspection of SMEs has been cancelled. The ban was imposed in 2009. The new law authorizes the tax inspectorate to check the documents of SMEs.
He pointed out that the PAP voted for the bill in the first reading, because the bill stipulated reduction of the turnover tax for SMEs from 3.5% to 1%. The party also demanded revising the provision on compulsory document control in the second reading. "However, the Government took no decisions to change that provision even following the two-day talks. Only the Minister of Finance signed a decree on abstention from ungrounded inspections of SMEs, except for the risky cases", he said.
According to Melkumyan's estimations, with introduction of compulsory document control, the SMEs' turnover will exceed 100 mln AMD and they will have to pay VAT. "As a result, the turnover tax will reach 8%, and this will lead the enterprises to bankruptcy", he stressed.
To remind, starting 1 October 2014, the turnover tax for economic entities engaged in the field of trade will be reduced from 3.5% to 1%. A status of the family business will be introduced. The economic entities having up to 12 million drams annual turnover will be registered as family business and exempted from taxes. Starting 1 January 2015, the following types of responsibility will be applied to SME: a warning for violation of the law, a 20,000 AMD fine for repeated violation and a 5% turnover tax for a third case of violation. The economic entities violating the Law on Turnover Tax for the 4th time will occur in the field of VAT. Starting 1 Jan 2016, a SME having no document flow will have to pay the tax at a higher rate - 5%. VAT tax will be charged, if an economic entity fails to submit document flow for a second time. Alongside with this, a system "law-abiding taxpayer" will be introduced. The system implies that SME will get out of the shadow and start submitting the necessary documents to the taxation bodies. The responsibility for violation of the given law and mechanisms of control over administrative violations will be toughened as well.