Armenia`s authorities restricting citizens` right to legal aid -  lawyers 

ArmInfo. The initiative of the Armenian authorities to review the turnover tax system and increase the tax burden of lawyers primarily affects ordinary citizens. This was stated on May 21 at a press conference by the Chairman of the Chamber of Lawyers of Armenia Simon Babayan, regarding the amendments proposed by the Ministry of Finance to the Tax Code of the Republic of Armenia.

According to Simon Babayan, the legal community was not informed in  advance about the planned changes and got acquainted with the draft  proposed changes after it was posted on a single portal of legal  acts. After studying the initiative, the first thing that caught my  eye was that the document was presented without a single  justification and statistics confirming the need to make these  changes. The Ministry of Justice also gave a negative response, since  the project affected the interests of notaries, as well, the head of  the Chamber noted.

As a result, a discussion on the issue was initiated in the relevant  commission, where it was recorded that the project was controversial.  We agreed to hold additional discussions.

Meanwhile, the lawyer notes, the Republic of Armenia and the state  have an obligation to the citizen to provide him with the opportunity  to use legal assistance. However, as a result of the application of  this project, the cost of legal services and, in particular,  lawyering, will sharply increase by at least 30%. The average citizen  will have to pay for this. At the same time, about 250 thousand cases  are currently being considered by the courts alone, which means that  this innovation will affect at least 250 thousand people, Babayan  explained.

In addition, after the introduction of new tax rules, lawyers will  have to keep very complex tax records in order to determine the  amount of taxes to be paid - correctly calculate income, deduct  expenses, take all this into account in reducing the tax base (if  such is possible in the practice of law) for tax, etc. And for this  you will need to resort to the help of a qualified accountant, which  involves new expenses. Under these conditions, it becomes almost  impossible to provide free legal assistance, the head of the Chamber  noted.

"The new tax burden will fall on the shoulders of an ordinary  citizen, since if he is not a VAT payer, then he will have to pay an  additional 20% VAT, and if the consumer of legal services is a legal  entity, then the services will become more accessible for him, since  being a VAT payer for the latter there will be an opportunity to take  advantage of the tax deduction," Simon Babayan indicated.

In this regard, lawyers today announced their refusal to participate  in any trials, as well as in any proceedings with government  agencies.

The government of Armenia plans to review the turnover tax system  from October 2024, and from 2025 to narrow the scope of beneficiaries  of the micro-enterprise system. Currently, turnover tax (replaces VAT  and income tax) is paid by business entities whose annual turnover  does not exceed 115 million drams (from January 1, 2020, Armenia  returned to non-taxable annual turnover up to 115 million drams).  This group includes SMEs, individual entrepreneurs and notaries. We  are talking, in particular, about payments of 5% from the turnover of  commercial activities and 3.5% from industrial activities.

Now the Ministry of Finance proposes to double the turnover tax rates  established for main types of activities, providing the opportunity  to reduce the tax payable through documented expenses. According to  the Ministry of Finance, this will stimulate the transition to a  common taxation system.

The legislative initiative, among other things, provides for a  significant increase in the tax burden on legal activities, proposing  to establish a turnover tax in the amount of 10% of profits from  October 2024, and introduce a general taxation system, including VAT  in the amount of 20% and income tax in 18% starting January 2025. "It  is obvious that if the project is adopted, the tax burden of lawyers  will increase sharply, which will lead to a significant increase in  the cost of legal services. After all, for this group of citizens,  expenses are an investment in knowledge and acquired experience. Then  what kind of deduction can we talk about? On the contrary, an  increase in rates will inevitably lead to an increase in the price of  legal services by at least 30-40%. As a result, access to legal  assistance will be reduced, especially for people of average income  and below, who will try not to seek legal assistance unless  absolutely necessary, as is done today in the case of medical  services," tax expert Tigran Keyan said earlier in an interview with  an ArmInfo.