Universal Income Declaration System for Individuals: What to Expect

A phased scenario is planned to implement the universal income declaration system for individuals in Armenia starting in 2023. Declarations will be submitted on an annual basis. It is expected that drafts of the declarations will be prepared by the State Revenue Committee based on the information at its disposal. These drafts can then be edited, adjusted, and supplemented by the declarant before being submitted to the tax authority as a version approved by the declarant.

This was stated by Arman Poghosyan, the Deputy Minister of Finance of Armenia, while presenting the legislative initiative of the Government aimed at implementing the universal income declaration system for individuals in the parliament. The discussion with the professional expert community was called on November 25 by Babken Tunyan, the Deputy Chairman of the Permanent Committee on Economic Affairs of the National Assembly, considering the public interest in the issue. The committee's vice chairman noted that the initiative is scheduled to be adopted by the end of the year. Parliamentary hearings will also take place before the discussion in the full session of the National Assembly.

The Deputy Minister of Finance also reported that in the first phase, those individuals will submit declarations who already file declarations to the Anti-Corruption Committee under the logic of the Law on Public Service. Individuals affiliated with business entities will also be declarants in the first phase. This refers to individuals who are participants or shareholders in a company that has had a turnover of 1 billion drams or more during the reporting year, or who have received a loan of 20 million drams or more from a resident commercial organization, or who are considered the ultimate beneficiaries of any resident commercial organization.

In the second phase, declarants will include individuals performing work or providing services under civil contracts but who are not involved in the first group, as well as those regarded as employees who were not included in the first phase. In the third phase, individuals who are resident citizens will become declarants, expanding the scope of declarants. This decision to broaden the group of declarants in the third phase is not yet the final proposal from the Government. According to the Deputy Minister, there may be a decision that underage individuals will not be declarants within these three years. The issue of pensioners submitting declarations is also subject to discussion.

The implementation of the system has three objectives. The first objective is to create a comprehensive database of personalized accounting data for individuals. The second is the establishment of a social component as a means of promoting investment in human capital. The third objective is to instill and reinforce a culture of tax payment. Responsibility will be stipulated for failing to submit declarations on time or for incompletely submitted declarations. “This is a legal norm; when a duty is established, there must also be corresponding responsibility; otherwise, we will have declared that we have not paid sufficient attention to discipline. Secondly, it may be that we will not be able to achieve our objectives. The scope of responsibility described in the draft is subject to discussion; every aspect is open for debate,” said the deputy minister.

Some participants in the discussion welcomed the initiative, while others were critical of it. It was noted that many provisions of the draft law are written in unclear and “chaotic” formulations such that it is not clear whether a particular provision applies to a person or not. The ultimate goal of implementing the system is also unclear. According to the participants, the purpose must be formulated very clearly; however, there is a disjunction of objectives and content in the presented draft. Some experts also found it unclear whether the proposed declaration system pertains to income, property, or generally to asset declarations. The provision regarding citizens benefiting from income tax refunds was considered unacceptable. The draft includes a provision stating that if a citizen has not submitted a declaration, the income tax they received can be reclaimed from them.

Babken Tunyan, the Deputy Chairman of the Permanent Committee on Economic Affairs of the National Assembly, clarified: “I admit that there is a need for further discussion regarding the responsibility. Regarding the income tax refund, perhaps it is harsh, and it might be worth discussing or softening.” The logic is as follows: if a citizen receives something from the state, in this case, even the refund of their paid taxes, then they should also work more transparently with the state.

Some parts of the discussion were held in a closed format.