Pashinyan Meets with Protesters

A sit-in organized by the Armenian Youth Federation of Armenia in front of the National Assembly to protest—and sound the alarm for—the government’s proposed plan to institute a flat tax went into its second day on Thursday, with protesters voicing their opposition to a tax bill that was being debated by lawmakers in parliament.

The AYF of Armenia’s movement, known as “Ahazang,” which means alarm in Armenian, aims to send a message to lawmakers and citizens alike that the proposed flat tax will create inequality among tax-paying Armenians.

“At the moment, our sit-in protest is still underway,” said Arshak Mesropyan, a member of the “Alarm” initiative’s coordinating group. “Today the supporters of our initiative will spend the night in front of the National Assembly building.

“This sit-in will serve as our [the AYF’s] contribution to the ongoing discussion in the National Assembly. We are ready to sit as long as it takes our deputies to realize the inequality a vote in favor of this tax code will create,” said Arshag Mesrobian an organizer of the “Ahazang” movement.

“The rich are bound to get richer and the poor poorer. The initiative will continue until this tax code is rejected. We demand a comprehensive reform of the tax system that will first serve the most vulnerable of the society and not widen the growing abyss between economic classes,” explained Mersrobian.

On Thursday, Prime Minister Nikol Pashinyan stopped by the sit-in and discussed his views on the proposed changes to the country’s tax codes with “Ahazang” organizers, who did not shy away from expressing their discontent and grievance.

The country’s ruling My Step Alliance has put forth the disputed proposal that would change Armenia’s taxation laws from a progressive one to flat taxation. In the current version individuals earning more also paid more taxes. Under the proposed tax laws, all personal income will be taxed at the same rate. Proponents of the changes argue that the flat tax is more fair and more in line with the goals of the post-revolution state. The current regime is hailing these changes as revolutionary, as they will stimulate the economy, lead to GDP growth and create a simpler, more equitable system for the future. Opponents of such changes argue the flat tax is a temporary solution to a wider societal issue that in reality will only benefit the society’s most affluent members.

The flat tax is a phenomenon that has gained popularity in recent decades among many post-Soviet and struggling economies around the world. Various countries that have adopted the flat tax system have seen considerable economic growth; however, the beneficiaries of that growth remain those in the top tax tier.

Russia, being one of the early adopters of such a system, has seen some success in the area. Its economy, having recovered from the pitfalls of the wider global economic crises of recent years, is now seeing a growth in GDP and a significant increase in tax revenue. Although ostensibly this seems promising for countries looking to reform their tax systems and are considering the flat tax, it’s worth taking a closer look at how such a system would affect the average citizen.

Armenia is a small economy. The majority of the workforce—more than 65 percent–earn a monthly salary of 150,000 drams (approximately $315 a month or less). Currently, the highest tier tax bracket pays 13 percent more than the lowest. The proposed changes would give a considerable tax break to the top tax tier as the proposed new tax percentage will adopt the lowest current tax for all citizens at 23 percent. This means the lowest tax tier will receive no benefit from the new law. This proves problematic when considering the overall outlook of the new government toward the average worker. By prioritizing tax deductions for the wealthiest in the society, the ruling regime believes these benefits will somehow boost economic growth and spending among citizens as those with the most money will now have more of it to reinvest in the economy.

This trickle-down approach may prove crippling for small countries like Armenia that have a large lower-class workforce. The money saved by the wealthiest rarely gets directly invested in the local economy, and often ends up elsewhere. Although there is research to support a correlation between GDP growth and flat taxes, that growth often only benefits those who are already well-established economically, with almost no guarantees that they will use the tax money they saved to create new jobs or stimulus programs as the new regime argues. A flat tax may help to stabilize a struggling economy, but it’s important to look at who that economy will serve.

The adoption of the new tax laws will also see a significant deficit in the state budget. A problem the government plans to rectify by simultaneously implementing an increase in sales tax. In addition to not receiving any benefit from the new tax system, the average Armenian worker will now be faced with the issue of increasing expenses. Taking this into consideration, the government’s previous promises to work for the average and most vulnerable people of the society seem like empty words.

Armenia’s economy under the new tax system will be stimulated at the expense of its most vulnerable contributors: those who are barely surviving—people living paycheck to paycheck, people working more than 12 hours only to see their costs of living increase.

It is for these reasons the Armenian Revolutionary Federation in Armenia is staunchly opposing the proposed changes. The party warns that the new law would be unconstitutional as it ignores the needs of the poor and relies heavily on the good will and word of the most financially stable of the society.

The ARF believes there is no guarantee those benefiting from the new laws will actually be motivated to direct their funds toward the betterment of society. This is a legitimate concern when taking into account Armenia’s volatile history with its political and economic elite—a class previously so disliked that it was overthrown in last year’s revolution.

“The new regime is essentially asking the working people who have entrusted them to secure their interests and well-being in the New Armenia to now put their faith in yesterday’s oligarchs to do the right thing,” said the organizers of the “Ahazang” movement.

“The mere suggestion brings into question the legitimacy of Armenia’s current regime whose rule was established under the guise of freedom for the disenfranchised, who now is attempting to convince society the same people who had been robbing them for nearly 30 years deserve the greatest financial benefit,” the “Ahazang” organizers added.

The AYF of Armenia has mobilized its membership to combat not only these proposed changes, but the growing misinformation in the country. The AYF has put forth a proposal for the future calling for not only an increase in the minimum wage by at least 50 percent, but also securing a minimum cost of non-taxable income to ensure the average worker can prosper without handouts or outside aid. In addition the AYF is suggesting to keep and reform the current progressive system with four tax brackets, targeting tax breaks for multi-member families and working class citizens.

The AYF of Armenia, through the “Ahazang” movement, is determined to see Armenia succeed and create a fair and free society where all people will prosper, and refuses to allow the New Armenia to be built on the backs of those it promised to elevate. The organizers are encouraging fellow Armenians to follow the “Ahazang” initiative on social media and help them to sound the alarm.