Hot Discussion: How to Tax Resident Companies Transporting Armenian Labor
11.05.2015
12:00
The recent proposed amendments to the laws on income tax and profit tax define that the resident companies in Armenia which take Armenian citizens to foreign countries to work may pay income and profit taxes to the state budget. The bill remains in the spotlight.

According to the reforms, Armenian citizens working abroad will be able to pay income tax of up to 13% and 5% profit tax in their home country.

The bill soon got referred to as a proposal to “tax khopanchis (labor migrants)” which “will fuel regular migration.” The majority of lawmakers speak for the changes. They believe the Government’s initiative was misinterpreted and wrongly presented because the authorities brought the bill to the floor hastily, without public discussions.

“The draft amendments were not presented fully and comprehensively and, as a result, it sparked discontent, with contradicting opinions to follow,” said Artsvik Minasyan, ARF-Dashnaktsutyun Faction.

The Media Center held a discussion on the amendments to the tax legislation and taxing labor migrants. The speakers included: Vardan Ayvazyan, Chairman of NA Standing Committee on Economic Affairs, RPA; Mikayel Melkumyan, Prosperous Armenia Faction; Artsvik Minasyan, ARF-Dashnaktsutyun Faction; and Aram Manukyan, ANC Faction Secretary.

The changes undertaken concern not only labor migrants but resident construction companies registered in Armenia, Vardan Ayvazyan said.

“Now the companies registered in Armenia which take labor migrants to a foreign country can pay income and profit taxes in Armenia. The law embraces organizations and not labor migrants, and actually it is optional. The resident companies may choose to pay taxes in the country they implement their construction projects,” Ayvazyan said.

With regard to the concern that the bill may violate the Russian legislation – the bill proposes paying taxes to the Armenian budget instead of the Russian one – Vardan Ayvazyan said the member states of the Eurasian Economic Union have comprehensive double taxation avoidance agreements.

Lawmaker Aram Manukyan spoke sharply against the amendments, pointing out that the changes may lead to mass migration. “The authorities don’t create jobs and good living conditions, instead they are facilitating migration.”

Mikayel Melkumyan and Artsvik Minasyan disagreed with Manukyan’s viewpoint. “It doesn’t lead to organizing migration; it is an organized labor migration. Registered in Armenia, these entities work in foreign countries and get outcome there. Now the country is attempting to generate some share of the GDP abroad,” Melkumyan said.

“In Armenia the overall turnover of construction firms amounts to 400 million drams which is equal to the turnover of one large construction company working in Russia. Can you imagine how much 18 percent of that sum may make?” asked the lawmaker.

The draft law, however, has a discrepancy: it lacks precise calculations and data regarding the Government’s expectations. There are no calculations, Melkumyan said, on how many companies may enter the Russian market and what turnover is predicted.

Arstvik Minasyan stressed the law fails to fix social insurance for labor migrants and that the reforms concern only resident companies.

Arshaluys Mghdesyan, Editor-Coordinator

Please contact the author at arshaluysmghdesyan@pjc.am.

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