“The Republic of Armenia should reclaim its once-glorious reputation of industrial country” - PM attends “My Step for Shirak Marz” economic forum
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On July 20, Prime Minister Nikol Pashinyan attended the My Step for Shirak Marz economic forum in Gyumri.
The Premier first toured the exhibition, launched as part of the forum, to get acquainted with the products manufactured by Shirak Marz-based companies: farm products, processed goods and commodities, textile, footwear, etc. The Head of Government asked the representatives of the companies about the organization of production and the upcoming programs.
Addressing the forum, Nikol Pashinyan noted that today’s event is an opportunity to talk about the conceptual approaches behind the Government’s economic policy a year after the well-known events.
“In essence, these concepts should be called conceptual provisions of the economic revolution that we will soon complete and present as a complete strategy how we imagine Armenia’s development and economic structure. At this stage, we have been able to make an important step, namely the Tax Code reform. In the economic policy, we also see different levels of tax change - the policy of micro, middle and macro businesses,” Nikol Pashinyan said, adding that the macro business will be kept in focus.
The Prime Minister informed that starting from January 1, micro business will be exempted from all kinds of taxes, the income tax for these companies will be set at 5,000 drams instead of 23 per cent.
“This is prioritized in a bid to boost business activity; we thereby pledge our support to citizens and call for action. This case is seen as an important tool for overcoming poverty. For example, in case of family business today we raised the threshold up to 24 million drams. The commercial booths outside Yerevan will also benefit from this January 1, which refers to those who do not work in trade centers. The guesthouses with turnover of up to 24 million drams will also benefit from this privilege,” the Prime Minister said.
According to Nikol Pashinyan, the Government’s economic policy has a well-pronounced social bias. Since July 1, drivers of taxis who are not individual entrepreneurs have been exempted from fees. Each month taxi drivers used to pay 12 thousand drams in Yerevan and 8,000 drams in the regions. Either the licensing procedure is now free for taxi drivers.
“This means that our compatriots are given the opportunity to engage in business activity, and we hope that this will be a benchmark for government-citizen cooperation. By exempting taxi drivers from tax liability, we hope they will consistently improve the quality of services. Note that tourists get some impressions from taxi services. Our task is to ensure that every foreign visitor would urge his fellow countrymen to come to Armenia,” the Prime Minister pointed out. The Head of Government said that with the new tax amendments, those individuals engaged in household work will be exempt of turnover tax. The tax threshold for restaurants has been returned to July 1, 2018, retroactive force has been reported to the law and restaurants have been given the opportunity to recalculate taxes.
“This is a strong impetus for tourism development. Most of these spheres deal with tourism. According to the Central Bank, tourists spent about USD 120 million in Armenia in the first half-year of 2019. With this policy, we open an economic opportunity for the citizens of the Republic of Armenia,” the Premier said, adding that the Government will curb the corruption-driven economic system and there will be no compromise in this matter.
Regarding the latest events in Idjevan, Nikol Pashinyan stressed that the Government does not intend to go to any illegal compromise. “We think we have created a propitious groundwork for the citizens of the Republic of Armenia to earn their bread with creative work and we will work consistently in this direction,” Nikol Pashinyan said.
Coming to the problem of cash registers, and specifically the question of how the government may come aware that a company has a turnover of 24 million drams a year, the Prime Minister said: “There is one possibility: wide circulation of CCMs. A person should issue a cash register for each transaction. If we see that the company is a micro business, it will be exempted from taxes. The Government’s policy will be tightened in this direction, and the law should be strictly adhered to.”
At the same time, the Premier underscored that our country’s economic status cannot be addressed only through the aforementioned improvements to micro business. “Our country should be an industrial state. In the near future we will focus on developing all kinds of industries. With these new tax amendments, we have set up a flat income tax and know that there are also some concerns about it, as it will raise the salaries of 146,000 people next year. Meanwhile, they constitute a minority among the employed. I think we have made the right decision. The practice of shady salaries is widespread in Armenia. With the introduction of flat income tax, we will provide a chance for employers and employees to get out of shade. We have to wait some time before we can see the way this correlation changes. In the coming years, we will lower the level of income tax by 20%, i.e. income tax is to be reduced for everyone,” Nikol Pashinyan said, adding that time will show the effectiveness of flat income tax.
The Prime Minister noted that the adoption of such a policy is also related to the government’s vision of the future of the Republic of Armenia.
“We are blamed for benefiting those who get high salaries. We say that we are pursuing a high salary policy. When we say we are building a technological country, we consider that we should no longer have a low salary segment: the labor market should be distinguished by high salaries and high-quality employees. Our strategic vision for the solution of this problem is the country’s industrialization, and we have to solve the problem of how we support industry and exporting industries. Let me remind you that this is one of the primary provisions of the government program, but I want to draw your attention to the multifaceted culture used in supporting domestic production. Citizens and consumers should have a preference for local goods and services while making purchases. Unfortunately, our local production is small, but small support can be of decisive importance here,” Nikol Pashinyan said, adding that he is wearing Armenian clothing, except for the tie.
Talking about improving the investment environment, the Prime Minister noted that the government should try to act as the main consumer of local products, but here the Executive may face a big problem. “Every year the government carries out major purchases, but as you may know, procurements are planned for the coming year. This cannot be an attractive investment for business people; therefore, we have made an important decision. Public agencies and enterprises should plan their procurements 5-10 years ahead. Our task is to determine, for example, how many computers to buy, make appropriate estimates, and find out whether hardware production can be economically profitable for potential investors within 10 years. If it turns out that it is not that attractive, then the applicable legislation will have to be amended accordingly,” the Premier said, adding that as a result, a long-term contract will be signed with the investor and the production of a given product will be organized in Armenia. Investors should realize that they need to get partners outside Armenia during the purchase so that the production process could continue as long as possible.
In the matter of economic development, Nikol Pashinyan attached importance to the projected land reform. Nikol Pashinyan thinks that 30% of our country’s labor force is involved in agriculture, 14% of GDP is agriculture. “The share of the labor force in agriculture should be reduced and the share of those involved in industry should increase in Armenia. In this sense, the land reform is very important, which should give an opportunity to develop industry and boost labor productivity. These efforts should be the next important direction of our government policy. We also see the technology sector as a leading branch of the economy. The latest legislative amendments have created better conditions for startups, and we will continue to pursue this policy. We are also interested in the tangible development of the military-industrial complex, and hope that the creation of the Ministry of High-Tech Industry will lead to concrete results,” Nikol Pashinyan said.
The Premier said an industrial collapse could be seen in the video which presented the current status of Shirak Marz. “On one occasion, I said that industrial zones and facilities were turned into commercial spaces over the past 30 years, and that the trade fairs should be transformed into industrial areas in the next 30 years, and the Republic of Armenia should reclaim its once-glorious reputation of industrial country. The new one will not be like the old industry, but we have enough intellectual potential, and we will be able to gradually develop said potential by means of educational reforms. We believe that this will also help us tackle the demographic problem in the country,” the Prime Minister said, noting that the problem should be solved by means of effective decision-making rather than through social programs.
The Head of Government reminded that the demographic problem in our country was solved when industry experienced drastic development in the Soviet era. “We can do the same for the second time, if we learn lessons from our past mistakes,” Nikol Pashinyan concluded, calling on everyone to make a decision deep down and demonstrate an irrevocable will in implementing their decisions.
During his trip to the Technology Center in Gyumri, the Prime Minister was introduced to investment projects underway in the region, which cover agriculture, tourism, processing industry and other spheres.