Fiscal effects and political purposes of introducing luxury excise tax in Armenia

Abstract

In Armenia, within the framework of legislative consideration of the 2012 fiscal year State Budget, the Government suggested a number of changes in the Law on Taxes, among them the most controversial being one of the amendments in the Law on Excise tax. According to the amendment, the owners of cars with the assessed value of 25 million AMD and more, or date of production 2 years, and engine volume 4500 cm3 and more should pay 20% of the total estimated value of the cars when imported. In Armenia this amendment came to be unofficially called “Luxury tax” and stirred up a lot of critique and disputes. Within the framework of current essay analysis of the fiscal effects and political appeals of luxury excises is carried out and estimation of the latest changes and amendments in the Law on Excise Tax of RA is made within the context of these analyses. The essay considers the international experience of luxury excises in US, UK, France, and Russia. The findings of the essay summarize the taxation of vehicles under the Property tax, the latest amendment with its expected fiscal effects and relevant statistics, the draft bill on luxury tax prepared by former MP Viktor Dallakyan, and the results of interviews with competent persons. Taking into consideration the analysis of the findings, the essay provides number recommendations aimed at improving the major problems revealed.