What changes are expected in the tax sector?

The government initiated one of the key reforms of tax administration, which was formed during the last year as a result of comprehensive cooperation between the state and the private sector. This was stated by SRC Chairman Eduard Hakobyan at the regular session of the National Assembly convened on April 14, presenting the proposed amendments to the Tax Code with the attached package.

According to him, the goal of the reforms is to strengthen the state-taxpayer mutual trust, to expand the right of taxpayers to be heard, to promote voluntary discipline, and to wage a more targeted fight against tax crimes.

The SRC president noted that changes are planned in three codes: Tax, Criminal and Criminal Procedure.

Accordingly, with the proposed amendments to the Tax Code, it is envisaged that the State Revenue Committee will not immediately submit a report to the law enforcement agencies upon receiving information regarding the alleged crime of non-payment of taxes. First, the information will be analyzed by internal tools and the taxpayer will be notified in order to provide reasonable clarifications. If reasonable explanations are not presented, the tax authority will register the offense through a thematic study and draw up an administrative act, which can be appealed according to the established procedure. Only then will the issue of filing a criminal report be considered.

The exception will be cases requiring immediate intervention when there is a risk of evidence loss. With the legislative amendments, it is proposed to review the limitations of thematic studies as well, making it possible to carry out more than one study during the year if necessary.

At least half of the approximately 600 preliminary assessments annually are expected to go through the administrative process, ensuring that taxpayers’ right to be heard is fully exercised.

According to Eduard Hakobyan, the thresholds of tax crimes will be revised in the Criminal Code. Currently, 10 million drams is considered a large amount, and 20 million drams is considered particularly large. The draft proposes to increase the large size threshold to 30 million AMD, for the next two years – to 45 million AMD, especially to increase the large size threshold to 50 million AMD, in the case of two following years – to 75 million AMD.

As a result of these changes, about 600 criminal cases could be decriminalized with the consent of taxpayers. In addition, in the case of a particularly large amount, the classification of the crime will change from serious to moderate.

Amendments are proposed to the Criminal Procedure Code regarding prohibitions during criminal proceedings.

Instead of confiscation of property, it is planned to introduce alternative mechanisms: provision of bank guarantees. The current legislation does not provide for such an opportunity. According to the initiators, the prohibition of property often disrupts the activities of businessmen and causes additional costs. It is also recommended to accept securities – stocks and bonds – as a guarantee, which will enable taxpayers to continue receiving income until the end of the criminal proceedings.

The draft also envisages the possibility, during the proceedings, with the approval of the supervising prosecutor and the decision of the investigator or the court, to release the restricted property from the restriction, if an equivalent bank guarantee or security is presented.

The proposed changes will contribute to the increase of legal clarity in the tax sector, the stability of the business environment and the strengthening of the constructive dialogue between the state and the private sector.

Babken Tunyan, deputy chairman of the Standing Committee on Economic Affairs, noted in a related speech that the project was discussed for a long time with the Government and all interested parties. According to him, this is a package of long-awaited reforms.

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