The National Assembly of Armenia (NA) met Wednesday to discuss the proposed changes to the country’s tax system. Members of the Armenian Youth Federation (AYF) in Armenia have gathered in front of the NA, braving the sun and heat for hours now to oppose these changes which they feel will be ineffective in reforming the livelihood of Armenian society. They have organized a sit-in protest to make their voices heard in a discussion they have been left out of.
“At the moment, our sit-in protest is still underway,” said Arshak Mesropyan, a member of the “Alarm” initiative’s coordinating group. “Today the supporters of our initiative will spend the night in front of the National Assembly (NA) building. This sit-in will serve as our contribution to the ongoing discussion in the National Assembly. We are ready to sit as long as it takes our deputies to realize the inequality a vote in favor of this tax code will create. The rich are bound to get richer and the poor poorer. The initiative will continue until this tax code is rejected. We demand a comprehensive reform of the tax system that will first serve the most vulnerable of the society and not widen the growing abyss between economic classes.”
The country’s ruling My Step Alliance has put forth a proposal that would change Armenia’s taxation laws from a progressive one to flat taxation. Previously, if you earned more, you paid more. With these new tax laws, all personal income will be taxed at the same rate. Proponents of the changes argue the flat tax is more fair and more in line with the goals of the post-revolution state. The current regime is hailing these changes as revolutionary, as they will stimulate the economy, lead to GDP growth and create a simpler, more equitable system for the future. Opponents of such changes argue the flat tax is a temporary solution to a wider societal issue that in reality will only benefit the society’s most affluent members.
The flat tax is a phenomenon that has gained popularity in recent decades among many post-Soviet and struggling economies around the world. There are a variety of countries that have adopted the flat tax system and have seen considerable economic growth; however, the benefactor of that growth remains the same: the top tax tier. Russia, being one of the early adopters of such a system, has seen some success in the arena. Their economy having recovered the pitfalls of the wider global economic crises of recent years, is now seeing a growth in GDP and a significant increase in tax revenue. Although ostensibly this seems promising for countries looking to reform their tax systems and are considering the flat tax, it’s worth taking a deeper look at how such a system would affect the average citizen.
Armenia is a small economy. The majority of the workforce, more than 65 percent, receive a monthly salary of 150,000 AMD (approximately $315 a month or less). Currently, the highest tier tax bracket pays 13 percent more than the lowest. The proposed changes would give a considerable tax break to the top tax tier as the proposed new tax percentage will adopt the lowest current tax for all citizens at 23 percent. This means the lowest tax tier will receive no benefit from the new law. This proves problematic when considering the overall outlook of the new government toward the average worker. By prioritizing tax deductions for the wealthiest in the society, the ruling regime believes these benefits will somehow boost economic growth and spending among citizens as those with the most money will now have more of it to reinvest in the economy.
This trickle-down approach may prove crippling for small countries with a large lower-class workforce like Armenia. The money saved by the wealthiest in society rarely gets directly invested in the local economy, and often ends up elsewhere. Although there is research to support a correlation between GDP growth and flat taxes, that growth often only benefits those who are already established, with almost no guarantees that they will use the tax money they saved to create new jobs or stimulus programs as the new regime argues. A flat tax may help to stabilize a struggling economy, but it’s important to look at who that economy will serve.
The adoption of the new tax laws will also see a significant deficit in the state budget. A problem the government plans to rectify by simultaneously implementing an increase in sales tax. In addition to not receiving any benefit from the new tax system, the average Armenian worker will now be faced with the issue of increasing expenses. Taking this into consideration, the government’s previous promises to work for the average and most vulnerable people of the society seem like empty words. The ruling alliance has been successful in convincing the average Armenian that they have their best interests in mind in implementing the changes promised during last year’s revolution. As events unfold, the image becomes more disheartening. Armenia’s economy under the new tax system will be stimulated at the expense of its most vulnerable contributors: those concerned with mere survival, people living paycheck to paycheck, workers contributing more than 12 working hours only to see their cost of living increase.
It is for these reasons the ARF in Armenia has taken a staunch opposition approach to these proposed changes. They warn that the new law would be unconstitutional as it ignores the needs of the poor and relies heavily on the good will and word of the most financially stable of the society. They believe there is no guarantee those benefiting from the new laws will actually be motivated to direct their funds toward the betterment of society. A legitimate concern when taking into account Armenia’s volatile history with its political and economic elite: a class previously so disliked that they were overthrown in last year’s revolution. The new regime is essentially asking the working people who have entrusted them to secure their interests and well-being in the New Armenia to now put their faith in yesterday’s oligarchs to do the right thing. The mere suggestion brings into question the legitimacy of Armenia’s current regime whose rule was established under the guise of freedom for the disenfranchised, who now is attempting to convince society the same people who had been robbing them for nearly 30 years deserve the greatest financial benefit.
The AYF of Armenia has mobilized their membership to combat not only these proposed changes, but the growing misinformation in the country. They have put forth a proposal for the future that will serve those whom our new Prime Minister promised to help. They are calling for not only an increase in the minimum wage by at least 50 percent, a promise yet to be delivered by Pashinyan, but also securing a minimum cost of non-taxable income to ensure the average worker can prosper themselves without handouts or outside aid. In addition they are suggesting to keep, yet reform the current progressive system with four tax brackets, targeting tax breaks for multi-member families and working class citizens.
As a direct action against the vote of these proposed tax changes the AYF Armenia has organized a sit-in protest in front of the National Assembly starting Wednesday, June 19 when the discussion on this issue will take place, until the scheduled vote on the next day. We encourage you to follow their initiative online via social media through their program entitled “Ahazank,” meaning alarm. They are determined to see our country succeed and create a fair and free society where all will prosper, and refuse to allow the New Armenia to be built on the backs of those it promised to relieve. The youth of Armenia are sounding the alarm against what may be the most detrimental policy change in post-revolution Armenia. Hear their call, and respond with action.