They as well as many owners of other small businesses have long been exempt from value-added tax (VAT) and profit tax set at 20 percent and 18 percent respectively, paying instead a single tax equivalent to just 5 percent of their annual turnover. The Armenian government announced last year plans to phase out this preferential taxation that benefited some 50,000 economic entities. It cited the need to create a level playing field for all businesses.
A bill enacted by the government recently excluded some of those entities, notably law, accounting and consulting firms, from this tax benefit and raised the tax rate to 10 percent for the others.
Hundreds of traders working at jewelry markets of Yerevan demanded that the government repeal the tax hike, effective from January 1, when they demonstrated outside Prime Minister Nikol Pashinian’s office last week.
Small-scale clothing retailers staged a similar protest there on Thursday. They said that they already have trouble competing with larger stores and shopping malls as well as rapidly growing online retailers and that the much higher tax would drive them out of business.
“They are making the already difficult life of the people even harder,” one of them told RFE/RL’s Armenian Service.
“I may have no buyers for days,” said another trader. “Now I will have to sell things at higher prices.”
The government raised the tax as it failed to meet its tax revenue target set by the 2024 state budget. The shortfall was expected to total about 200 billion drams ($500 million), a figure equivalent to nearly 8 percent of the target.
The worse-than-expected tax collection appeared to reflect slowing economic growth in the country. The Armenian economy was projected to grow by 5.8 percent last year, down from 8 percent in 2023 and 12 percent in 2022. The government has forecast a growth rate of 5.1 percent for 2025.