Reducing Income Tax May Lead to Increase in Shadow Economy: MP

The bill to reduce income tax contains numerous risks; in particular, it can lead to an increase in the shadow economy, said Armenian Revolutionary Federation MP Artsvik Minasyan (pictured) in parliament today.

The bill the government is proposing aims to reduce income tax from 3.5% to 1% for those business entities that have an annual turnover of 58.3 million AMD (a little less than $142 thousand USD).

In Minasyan's opinion, the new law will lead to small business owners striving to show a turnover of less than 58.3 million, hiding their real revenues.

Speaking about the importance of increasing the revenue threshold for small businesses, Armenian National Congress MP Levon Zurabyan said the threshold should be 150 million AMD (about $365 thousand), since 58.3 million is a very low figure for annual turnover.

Zurabyan also expressed concern that tax privileges will be given only to those business entities working in area of trade. 

Deputy Minister of Finance Vakhtang Mirumyan presented the bill in parliament today. He said the new law will not only reduce taxes, but also create a new business — the family business. According to him, those having this status will be exempt from paying taxes. This will be the case if the business entity has up to 12 million (about $29 thousand) turnover and will include family members in the business.

Overall, parliamentarians welcomed the idea of reducing the income tax, but they advised the government to revise the bill so there won't be a need to amend it later.