A government-drafted bill setting a considerably reduced profit tax rate for large-scale exporters has sparked debate in Armenia after reaching the National Assembly this week.
In an effort to attract more foreign investment, the Armenian government last month unveiled its plans to cut the tax from 20 to just 2 percent for manufacturing companies annually exporting at least 50 billion drams ($106 million) worth of goods other than metals and ores.
An elaborated bill setting the export volume threshold at $40 billion drams (about $84 million) and envisaging a 5-percent corporate profit tax was put on the agenda of this week’s four-day session at the National Assembly.
The parliament leadership first designated the bill as “urgent” that required that it had to be debated and voted on within 48 hours, but on Thursday Parliament Speaker Galust Sahakian said that the vote on the bill is likely to take place in early March.
Still when presenting the bill at the Cabinet meeting on January 23 Prime Minister Hovik Abrahamian said: “This is one of the unconventional government steps aimed at stimulating exports.”
According to the National Statistical Service, Armenian exports fell by 22 percent last month as compared with the volumes reported for January 2014. Copper, other base metals and ore concentrates traditionally account for a large part of the export revenue. The government said the proposed tax advantages do not apply to companies engaged in the mining industry.
Despite the government’s assurances that the proposed bill will stimulate exports and will also mean more jobs and other tax revenues, many opposition members in the parliament voiced skepticism and pointed at what they believe are pitfalls in the new legislation.
“We consider it as a step aimed at monopolizing foreign trade, another disgraceful step that will ensure super profits for those in the government and will again deprive small and medium-sized enterprises of all opportunities,” said Levon Zurabian, the head of the opposition Armenian National Congress faction.
Hovannes Markarian, of Orinats Yerkir, meanwhile, noted that the legislation primarily targets foreign investors as there are no such large exporters among manufacturing companies inside Armenia.
“It is clear that our citizens who are engaged in exporting businesses will not be able to take advantage of these tax privileges,” he said.
Opposition lawmaker Hrant Bagratian, who headed the Armenian government in 1993-1996, spoke in favor of providing businesses with tax breaks, but he called for a level-playing field, saying that all exporters should be able to use this opportunity.
Meanwhile, members of the ruling Republican Party of Armenia (HHK) defended the bill, saying there is no issue of concrete personalities in it. HHK member Vardan Ayvazian said he would welcome any businessman who makes investments for setting up an exporting business in Armenia.
Earlier, during the first day of the debate on Wednesday, another majority party lawmaker Garegin Nushikian said that even if a scenario presented by the opposition lawmakers is realized and everything is concentrated in the hands of just one organization, there will be “nothing terrible” about it.
Member of the Armenian Revolutionary Federation Artsvik Minasian, meanwhile, expressed concern about possible situations when essential goods will be exported from Armenia in large quantities which would lead to a sharp rise in prices. He called on the government to find ways to prevent such possible scenarios.
In postponing the debate and vote on the bill Parliament Speaker Sahakian said on Thursday that the decision will give the lawmakers more time to discuss the bill.
Meanwhile, opposition lawmaker Khachatur Kokobelian believes the reason for the decision was “technical”. The HHK did not have enough deputies in the chamber to ensure the passage of the bill, he said.
Kokobelian voiced concerns that exports in Armenia may be monopolized, which, in his opinion, is fraught with risks of more government corruption. “In practice it will be the government that will decide who should be provided with these privileges and who should not,” the opposition lawmaker said.