Tuesday, February 3 2015 14:28

 Vardan Ayvazyan, MP from the Republican Party of Armenia, does not understand the small and medium entrepreneurs' indignation at the Law "On Turnover Tax".   

He assures that by means of this law Armenia's authorities are trying to involve the shadow large enterprises in the tax field. He says that the large enterprises and the importers sell their products via the SMEs. Consequently, the document flow of the SMEs will allow controlling the large enterprises. "It is hard to believe that the annual turnover of 34 thsd out of 42 thsd enterprises is less than 3-4 mln USD. If we divide that turnover by 365 days, their daily proceeds total 10-8 thsd AMD. Nothing will be left for the businessmen if we also subtract the goods price and electricity costs. Then why do the businessmen work if they get no income?" says Ayvazyan.  

In addition, Ayvazyan thinks that not only large but also small enterprises are trying to underreport the turnover in order not to exceed the VAT threshold (58 mln AMD per annum). He stresses that SMEs prefer to pay the turnover tax, which is being reduced from 3.5% to 1%, but to submit no documents. "This means that in fact they prefer to pay 3.5% of the turnover reported than 1% of the real turnover. So, the law is correct", he says.  To note, the Government of Armenia convened extraordinarily on January 31 and postponed application of the Law on Turnover Tax till July 1 2015.

To remind, the law looked to reduce the turnover tax for economic entities engaged in the field of trade will from 3.5% to 1% starting 1 October 2014. The decision sparked public outrage and the Government was reluctant to postpone the law till February 1 2015.  The point is that the Law has a provision on compulsory document flow of the deals, which has prompted the protests.  The medium and small importers, mostly, importers of clothes, think that they have no enough resources to hire accountants to compulsorily submit a document on inventory as of 1 Feb 2015 to the tax bodies.  Otherwise, 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.