They have long been exempt from value-added tax (VAT) and profit tax set at 20 percent and 18 percent respectively, paying instead a “simplified tax” equivalent to just 5 percent of their annual turnover. The government unveiled on November 7 a bill that would exclude legal profession, accounting, consulting, advertising, construction, architectural design and real estate trade from the types of economic activity covered by this tax benefit. It said companies and individual entrepreneurs involved in those sectors enjoy an unfair advantage over other businesses.
Deputy Finance Minister Arman Poghosian repeated the government arguments during a parliamentary hearing on the bill organized by the ruling Civil Contract party on Tuesday.
“For example, medical workers or teachers pay 20 percent tax on their salary while an individual entrepreneur either does not pay such tax or pays only 5 percent turnover tax,” said Poghosian.
Representatives of small business associations present at the hearing rejected the official rationale for the proposed measure, saying that it would only hurt SMEs and encourage tax evasion among them. They said the government should concentrate instead on tackling the informal sector of the Armenian economy.
The government already tried to enact such a measure against law firms and individual attorneys in May this year. Hundreds of them went on a one-day strike in protest at the time.
The latest government initiative also drew criticism from opposition lawmakers. One of them, Artsvik Minasian, said it is aimed at “filling the state budget” even if that causes many affected businesses to shut down.
Despite continued robust economic growth, the government reported a major shortfall in its projected tax revenue in the first half of this year. GDP growth has slowed down since then. The Armenian Finance Ministry expects this downward trend to continue next year and in 2026.