1. New Tax Code as an Important
Step to Improve Business
Environment in Armenia
February, 2016
Teresa Daban Sanchez
IMF Resident Representative to
Armenia

2. Motivation
Tax compliance costs in Armenia are high, for
several reasons, but especially because of the lack
of a Tax Code.
Tax collections have increased a lot in recent
years, but still Armenia’s tax ratio remains below
peer countries
2
High tax compliance costs and relatively low tax
collections reinforce each others, and both are
hampering investment and growth in Armenia.

3. Outline
Armenia’s Tax System : An Overview
Tax Code: The Main Proposals
Under Discussion
3
Expected Outcomes and Calendar

4. 4
Armenia’s Tax System: An Overview
•Strong growth in revenues from 2006 but leveling off
in 2013
•Relative stability of tax structure, with marked
decline in excises (tobacco, alcohol, petroleum
products, etc) , low reliance on direct taxes (e.g. PIT,
CIT) and property taxes.
•Predominance of presumptive taxation (e.g. turnover,
notaries, casinos, etc), although with declining
collection.
•Shadow economy of 30 to 50 percent of GDP creates
unlevel playing field for formalized business &
taxpayers.

5. 5
Tax Code: The Main Principles and Goals
•Enhancing revenue collections, to ensure fiscal
sustainability and high level of capital expenditures.
•Shifting taxation out from production and income
towards consumption, to promote long-term growth.
•Fostering equity and fairness, to level the playing
field and protect the most vulnerable
•Ensuring simplicity, consistency, predictability,
good tax administration, best practices, to reduce
compliance costs

6. 6
Tax Code: The Main Proposals : Tax Policy
VAT: Eliminating main exemptions on agriculture,
health, education, diesel, etc.
CIT: Simple & and broad-based with internationally
competitive statutory rates, and depreciation rules.
PIT: Broadening the base by including capital
income (e.g. capital gains), with a flat rate of 20
percent; in addition, IMF is encouraging a threshold,
self-assessment and tax audits on individuals

7. 7
Tax Code: The Main Proposals : Tax Policy
(continued).
Excises: Increasing rates/expanding base to
converge to EEU and international practices (e.g.
gambling, environmental taxes).
Property Tax: Align cadastral values of land and real
estate with market values.
Presumptive taxation: Streamlining, by reducing the
VAT/turnover tax threshold (to AMD 40 million).
Transfer Pricing: Discouraging profit-shifting by
multinationals and domestic “sister” companies

8. 8
Tax Code: The Main Proposals : Tax
Administration
•Speeding refund of tax credits, establishment of taxpayers’
single accounts at the Treasury.
•Streamlining and clarifying procedures for tax audits
•Clarifying responsibilities and limiting discretion of tax
officers.
•Improve procedures of provision of clarifications and
notifications to taxpayer’s by the tax authorities.
•Ensure fairness of the sanctions imposed for incompliance
with tax legislation and greater clarification of tax offenses.
•Develop an extrajudicial appeal system for discussions of tax
issue-related applications-complaints, thus strengthening
confidence of taxpayers in this system.

9. 9
Tax Code: Expected Outcomes and Calendar
•At present, a Draft Tax Code is under discussion in a public
consultation process at the Tax Council (regular meetings,
representatives of private sector, IFIs, etc).
•The government’s commitment is to submit a Draft Tax
Code to the National Assembly by March 30, 2016.
•Expectations are that the Tax Code could be approved in
2017 and fully implemented in 2018.
•IMF estimations is that the final Tax Code could help
increase tax revenues by 2.5 percent of GDP over the medium
term.