2024-02-22 07:29:14
Hetq.am writes: The Ministry of Economy proposes to increase the income tax of IT (information technology) employees to 5%. Currently, the income tax in Armenia is 20%. Many IT companies enjoy the privilege of paying 10% income tax.
However, the Ministry of Economy considers that this sector suffers so much from the significant devaluation of the dram against the foreign currency, or in other words, from the drop in the dollar exchange rate, that it needs state support again. Many IT companies receive revenues from abroad in US dollars.
In this regard, the project is open for public discussion in the e-draft.am system. The Ministry of Economy proposes to establish a 5% income tax for IT companies whose gross income of 80% or more during the previous tax year was generated from sources outside the Republic of Armenia.
“The devaluation of foreign currencies, especially the US dollar, which has been observed since the beginning of 2022 and is now tending to be maintained, has a direct negative impact on the activities of those businessmen in Armenia, the majority of whose financial flows are formed as a result of relations with foreign partners. Moreover, as a result of the 20 percent devaluation of the US dollar, the financial income of local companies has been correspondingly reduced, hindering the normal development and advancement of organizations,” it is stated in the justification of the project.
The Ministry expects that the result of the next privilege given to the IT sector will be the stability of the development process of the activities of the mentioned sector.
The following sub-sectors of IT can use this privilege: “Publishing of computer programs”, “Development of software, consultations and related activities in the field of computer technologies”, “Data processing, distribution of information on the network and related activities, activities related to web-portals”.
A project without economic and financial justification
There is no economic and financial justification in the published project that the 5% income tax will “save” the IT sector or establish stability in that sector. Instead, the specialists of the Ministry of Economy presented examples of other countries where the IT sector is privileged: Portugal, Cyprus, Belarus, Kazakhstan.
In our written request sent to the Ministry of Economy, we asked to present the economic or financial calculations underlying this project. However, it seems that there are no such calculations.
“When defining the specified rate of privilege, the problems presented by the representatives of the sector and the international experience were taken into account, in particular, the examples of comparable states (for example, Georgia, the Russian Federation, etc.),” this is how the Ministry of Economy answered our question about economic or financial calculations.
In order to grant a 5% income tax exemption to the IT sector, it will be necessary to amend the “Tax Code of the Republic of Armenia”, as well as add to the “Law on Currency Regulation and Currency Control” that IT organizations whose gross income is 80% or more during the tax year originated from sources outside the Republic of Armenia, the salary and equivalent payments paid to the employees of these organizations may be quoted in foreign currency.
The budget will suffer, but they don’t know how much
We asked the Ministry of Economy how much money the RA state budget will lose as a result of this decision.
As a result of the adoption of the bill, it is planned to reduce the revenues of the state budget. This is mentioned in the project. Only this line. The ministry did not give us any other details.
Instead, the ministry noted that the possible insignificant decrease in tax revenues as a result of the adoption of the project is justified by the decision to relocate many companies interested in the prospect of moving to Armenia, the creation of new jobs, the exchange of experience and knowledge, and this initiative will contribute to the continuity of the activities of many companies that have already moved to Armenia: increasing the attractiveness of Armenia as an investment destination.
More details on the source website.