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