tag:blogger.com,1999:blog-32480522.post7644529475724771945..comments2021-10-03T18:55:34.018+04:00Comments on The Armenian Economist: Tax HolidaysUnknownnoreply@blogger.comBlogger5125tag:blogger.com,1999:blog-32480522.post-17180701045193740602007-08-02T08:27:00.000+05:002007-08-02T08:27:00.000+05:00Sergey,You raise a number of interesting questions...Sergey,<BR/>You raise a number of interesting questions. Tax holidays are usually offered to attract capital (investments). Effectively the goal is to reduce if not eliminate the tax on the return to capital so as to attract it to the country or to a specific sector. In that sense, the treatment of labor income is not relevant.<BR/><BR/>Note that Armenia is a small impoverished country. There is no way that on its own it can subsidize (through tax exemption, build roads, and other infrastructure, ...) every industry. Personally, I hate to see the gov't pick winners and losers, and much prefer expanded attention to educational institutions (i.e. subsidize human capital). My gut feeling is that the IT sector will grow and expand as the demand from other domestic sectors expands (telecom, finance, hospitality, health care, ... ) and not from the tax treatment it is accorded -- but I can be wrong.<BR/><BR/>As to your example of the monitors, yes setting exemptions can get quite messy. The VAT application at the border, however, is an important policy question. I know that this was the subject of extensive debates and its adoption may have been forced on the gov't by external donors. The logic is simple. You need to levy the VAT the border to enhance compliance; hard to collect the tax later on. Usually, the VAT paid at the border is creditable. But what if you do not have enough of a liability to credit against or the tax authority is ill equipped to handle refunds (see AmCham's white paper on the Armenian tax), then you may be stuck with the tax or some portion of it. The VAT is supposed to be a consumption tax, and capital equipment is fully exempt!<BR/><BR/>I have read the tax laws many times over, and I am somewhat familiar with how tax administration works -- but nevertheless I feel I know so little. So it'll be good to see others write on the subject.Davidhttps://www.blogger.com/profile/04474406562617719849noreply@blogger.comtag:blogger.com,1999:blog-32480522.post-5814904531312931412007-07-31T22:27:00.000+05:002007-07-31T22:27:00.000+05:00Consider a situation: you are importing an IT rela...Consider a situation: you are importing an IT related technology. Yes, the "Favorable customs regime does not oblige you to pay 10% customs duty, and you pay VAT of 20 for the equipment brought in. Also, you will get the 20% back when you sell the equipment. But if you are not? If you use it for R&D or production or whatever, this means that you are paying this 20% anyway? I think this is absurd. What do you think!!?<BR/><BR/>Second question:<BR/>Again about our transparent and very professional customs regime. Well, I am not talking about what price they are considering as a base for counting customs duties and VAT payable when I import goods to Armenia, I am "ok" with this. They claim PC are not duty levied. Monitors are, it's 10%. Suppose I am bringing Lap-top in. Is it considered to be a monitor or a PC... <BR/><BR/>and my last concearn. If an IT sector is proclaimed to be a priority in Armenia, then why do we (IT sector companies) pay social and Income tax for our employees? Where are the incentives? Where is the E-Village, and Ok, if it's in Charentsavan-something how do I get there and are tax exemptions merely enough? I will need infrastructure, roads, water, internet... It's complicated. <BR/><BR/>What would you suggest?Anonymoushttps://www.blogger.com/profile/01327760491159387206noreply@blogger.comtag:blogger.com,1999:blog-32480522.post-90658795595472428112007-01-25T23:28:00.000+04:002007-01-25T23:28:00.000+04:00Repealing taxes on capital and relying on consumpt...Repealing taxes on capital and relying on consumption taxes is a fine idea. The problem is that the current VAT is replete with holes. Agriculture is exempt, so are the jewelry industry, educational institutions, financial organizations, international organizations, embassies and diplomats, charities, ...<br /><br />There are a lot of reasons why countries choose to tax businesses, or capital in general. Some of it is political and may reflect a policy that is reflective more of equity rather than efficiency considerations. (More on taxes in an upcoming post)<br /><br />I am not sure if taxes have a significant impact on the investment environment in Armenia. I think education is by far more important, and we're not doing a good job at it at all.Davidhttps://www.blogger.com/profile/04474406562617719849noreply@blogger.comtag:blogger.com,1999:blog-32480522.post-9011233158475445682007-01-25T07:57:00.000+04:002007-01-25T07:57:00.000+04:00One should not forget that Armenia is a risky plac...One should not forget that Armenia is a risky place to do business. The low taxes on investments is the premium that the government pays for those investments. Had these tax laws been in place in a different country that was not in war, and in hostile relations with a powerful neighbor, the economy would booming. But even with these laws Armenia is unable to attract major investments. <br /><br />A solution would be to abolish all business income tax, and rely on employee income tax, and VAT. That would mean reducing the size of the government which would be a great achievement. As it is, Armenia has a huge government comprised of people with absolutely not value-added activity.Ankakh_Hayastanhttps://www.blogger.com/profile/05325640735361093139noreply@blogger.comtag:blogger.com,1999:blog-32480522.post-45163096920289008642007-01-12T05:19:00.000+04:002007-01-12T05:19:00.000+04:00Even the IMF recommended the Armenian government t...Even the IMF recommended the Armenian government to allow tax holidays for foreign investors to expire (see http://www.imf.org/external/np/sec/pn/2006/pn06138.htm)<br /><br />I think this will benefit the Armenian economy by expanding the tax base and therefore increasing the revenue/GDP ratio which currently does not keep up with the high GDP growth rates. The question is whether these revenues will be put into beneficial use by the government (financing education, social services etc.).Anonymousnoreply@blogger.com