‘Inflation Is Inevitable:’ Armenian Parliament Passes Amendments to Excise Tax Law

The Armenian National Assembly resumed on Thursday discussions on and passed an amendment bill of the RA law “On Excise Tax.” The envisaged changes will come into effect on May 1, 2016.

In June this year, the Government introduced into Parliament its bill that proposed to increase excise tax rates by an average of 10% for cigarettes and alcohol, in order to bring them into conformity with the standards of the Eurasian Economic Union. 

In addition to raising the rates for cigarettes and alcoholic beverages, the resubmitted bill today also proposed to introduce new excise tax rates onto compressed natural gas (CNG) for entities that operate CNG fueling stations. The adopted amendments envisage a rate of AMD 8, 330 (about $17) for 1000 cubic meters of CNG. 

During the discussion, Armenian Revolutionary Federation faction MP Artsvik Minasyan stressed that this was the exact opposite of what the Government had promised in its project, i.e., to reduce the excise taxes by AMD 53.2 billion in 2016. 

“This is a troublesome initiative. The submitted bill foresees introduction of a new type of tax on compressed natural gas that motor vehicles operate on, which will have a negative impact,” the lawmaker said.

Minasyan added that the above-mentioned tax changes were first presented as a requirement of the Eurasian Economic Union; however, the current draft notes that the requirement comes from the International Monetary Fund. The least they could do, as stated by the MP, is send an inquiry to the IMF as to how the organization though these tax increases possible in Armenia's economic conditions, given the fact that trade turnover in the country has decreased by almost 6%.

Lawmaker Khachatur Kokobelyan, in turn, stated that the amendments would affect local producers negatively. “Have you thought of what would happen in the event that some productions – of vodka or cigarettes – closed? And they will, since it won't be profitable [to operate with the new rate]. It will open access for law quality Russian products into Armenia. Excise tax on natural gas would mean an increase in mass transport rates. The rise in transportation prices would lead to price hikes in other spheres also. The inevitable inflation would only worsen the conditions of local producers.”