Discourse on “Fiscal policy”

 

#EnlightTalks series within the framework of “Enlight” three-month analytical internship program.

On June 26, within the frameworks of the analytical internship of “Enlight”, a discourse-discussion on “The types of Fiscal policies and their methods of usage” took place.  The speaker was Narine Petrosyan,  analyst at “Enlight”, economist.. Specialists from humanitarian and economic spheres participated in the discussion.

The general meeting can be divided into 3  parts. 1.The speaker introduced the essence of the Fiscal policy, the main mechanisms, the types, the tools, the effective criteria and the importance and modernity of the topic.

2.In the second part, after  general review on  Fiscal policy, the topic was localized to  ’’Tax changes in Armenia”. The changes of the tax legislation in Armenia, started from 2018 and enacted from January 2020 were particularly discussed.

3.In the third final part, a discussion was held. The participants expressed their opinions, perspectives on   tax changes implemented in Armenia, and emphasized the advantages and disadvantages of the tax changes from their perspectives. In the end, the speaker of the meeting  Narine Petrosyan  expressed her observations and complements on the topic pointing out the ways of solutions to the problems, thus also stressing the importance of such discourse-discussion in this format.

A brief reference to the three parts of the meeting one by one.

  1. From the review part of Narine Petrosyan’s discourse on the topic of Fiscal policy.

The Fiscal policy is the state’s effect on the economy due to the state expenses and tax changes for the clearance of economic periods and economic growth.

The tools of the Fiscal policy are state investments, state purchases, public jobs, tax burden change, social projects, state transfers.

The effectiveness of the Fiscal policy is determined by the deficit dimension of the state budget and the change of the speed of the state debt amount.  The effectiveness criteria of the Fiscal policy are  part of the budget deficit, which is covered at the expense of the monetization, the extent of tax collectibility, the performance of budget obligations, the part of state financial resources, which is directed to the service of state debt.

The effectiveness is expressed by the existing economic growth in the state.

The types of Fiscal policy are supply-side (discretionary and nondiscretionary) and demand-side. 

  1. Tax changes, started from 2018 and enacted from January 2020 in Armenia, particularly: 

the new law on microenterprises: On the scope of this tax system,  entities will be free from all the main taxes and will have opportunity to involve unlimited physical persons  (regardless they are family members or not) in their activity as employees, and their individual month income tax will be 5000 AMD,

profit  tax: Since January the 1st, 2020 the profit tax has gone down by 2% becoming 18%. From 2020 the dividend, received from the non-resident companies, will be taxed by 5% instead of 10%. This rate relates to the dividends received from the profits of  2020 and the proceeding accountable periods,

income tax:  transition from the progressive tax system  to the flat tax system  (since the 1  January, 23%) by the decision to gradually decrease it by 1% every year, and until 1 January 2023 by 20%),

social fees: responsibilities of economic entity increase by 2.5% / the state’s responsibilities decrease by 2.5%: the previously working footing (2.5/7.5) became 5%/5%,

value-added tax: from 2019, the resident taxpayers, whose turnover of sales exceeds 115 million AMD, (instead of 58.3 million AMD), are considered as VAT payers.

excise tax: additional excise taxes were determined for  a number of products ,

property tax: this has become a subject of public discussion in a wide range and is a controversial tax change, in which (of rate change) the main difference is the transition  of the cadastral price calculation of the property to the evaluation of a property by the market price.

  1. In the last part of the meeting, after the representation of tax changes, the speaker suggested the participants share their opinions about the tax changes by giving each of them 5 minutes to indicate their opinions on tax changes  mentioning the strong and weak points, and in the end, the speaker of the meeting Narine Petrosyan introduced her opinion, observations and summed up the meeting.

You can get acquainted with Narine Petrosyan’’s analytical articles by following this link.

Translator: Jemma Khachatryan © All rights are reserved