Armenian Government Moves To Toughen Tax Enforcement

YEREVAN (RFE/RL)–The Armenian government unveiled on Thursday draft legislation expanding the mandatory use of cash registers by businesses in Armenia and significantly toughening financial penalties for their failure to do so.

Under an existing Armenian law, economic entities that are caught not inputting their sales or services into cash registers must be fined 75,000 drams ($208). A repeat violation carries a 150,000-dram fine and a five-day suspension of their operations.

Draft amendments to that law approved at a weekly meeting of Prime Minister Tigran Sargsyan’s cabinet would double the amount of these fines. They also stipulate that companies that fail to properly use cash registers for a third time within one year must pay fines equivalent to 2 percent of their monthly business turnover.

They have until now been fined 300,000 drams and shut down for ten days. The proposed amendments, which the government hopes will be swiftly passed by parliament and take effect in January, would thus replace the temporary shutdown with a heftier fine.

The draft amendments also make clear that commercial banks and other financial companies will not have to install cash registers. They would instead become mandatory for law firms and notary offices.

Some Armenian lawyers were quick to denounce the measure, saying that it would give tax authorities more leverage against law firms involved in legal action against the government. “Use of cash registers would be one way to suppress law firms,” claimed one of them, Ara Zohrabian.

“If this becomes a law, we will definitely challenge it in the Constitutional Court,” warned Gevorg Gyozalian, another attorney. “Many lawyers are already fed up with this tax administration. We already have cases of groundless fines imposed on lawyers.”

Gyozalian said that lawyers should not be treated as entrepreneurs. “Very often we provide legal services free of charge,” he told RFE/RL’s Armenian service.

The law on cash registers was enacted in 2004 as part of a government crackdown on widespread tax evasion among small and medium-sized enterprises (SMEs). The government has since gradually extended it to the vast majority of businesses involved in retail sales and services, despite meeting with fierce resistance from small traders. The latter have previously paid fixed taxes depending on the size and location of their premises.

The use of cash registers allows the State Revenue Committee (SRC) to keep track of business transactions and levy value-added tax (VAT) from them accordingly. VAT is the single largest source of Armenia’s budgetary revenues, accounting for approximately half of various taxes and duties collected by the SRC.

In a statement issued after the cabinet meeting, the government said a more stringent enforcement of the law would put tax officials in a better position to determine business earnings and prevent tax fraud.


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