Armenia to introduce controversial new ‘health’ tax

The Ministry of Health proposes to establish a new tax, mandatory for all working citizens of the country – medical.

The concept is to make medical services more affordable.  However, for this, the Ministry of Health proposes that 4 to 6 percent of salaries – regardless of size – be deducted for the tax.  Everyone who wishes to familiarize themselves with the project in detail and express their opinion can visit the electronic platform e-draft.

As of the morning of November 28, 70% of online respondents had voted against the adoption of the new bill.

The new universal health insurance tax is expected to be introduced from 2022.  This will happen if the government, parliament and citizens agree to this proposal.

Judging by the wave of indignation that the “health tax” has already raised in society, its discussion in the government and parliament will also be difficult.  A negative reaction, in particular, was caused by the fact that the new tax is proposed by the same ‘revolutionary’ government, which earlier promised to reduce taxes.

 More on the new bill

On November 26, the Minister of Health of Armenia Arsen Torosyan, in response to public protest, decided to explain live on his Facebook page what the Ministry of Health was guided by while developing the idea for the new tax:

“The basis of this proposal is both an analysis of experience in the history of the independent Republic of Armenia, as well as the best international experience, as well as the reality in which we live today.”

According to the minister, getting sick in Armenia is a disaster for people in Armenia, because when a person gets to the hospital, he takes a loan or is left without a house and a car.

Arsen Torosyan emphasized that 85% of Armenian citizens pay for their treatment out of pocket.  And given the incomes of the population, “these expenses lead to the impoverishment of our citizens.”

The ministry has decided to introduce an additional tax in order to make health care more accessible – for everyone, that is, for about the three million people in the country.

According to the ministry’s calculations, an additional 250 billion drams ($525 million) is needed for this, and only 109 billion drams ($228 million) is allocated from the budget.  A new tax will have to fill this deficit.

According to the minister, this project is designed to solve a social problem, it will allow Armenia to become a society where workers care about the health of the unemployed:

“A non-working citizen is your wife, perhaps your minor children who are not yet working, your parents who have worked, retired, but do not have any state guarantees, those are your relatives who often borrow from you, however  currently have no job.  That is, this concerns us all.  We are not paying for some strangers.”

According to him, if in 2020-2022.  the health care budget will annually increase by 10-20 billion drams ($20-40 million), then in 2022 it will be possible to establish a tax of 4% on salaries.

“But, the fact that Armenia will have to attract additional funds is inevitable,” Torosyan emphasized.

The project rationale says:

“According to preliminary estimates, for more than 41% of the working population (receiving 150,000 drams [$315] or more monthly), the new tax will not be an additional burden. For the remaining 59%, the introduction of tax is mitigated as a result of the income tax equation by lowering its interest rate.”

Expert opinion

Against the new tax, Pailak Tadevosyan, chairman of the public organization Protection of Taxpayers, has already spoken out.  On his Facebook page he wrote:

“The prime minister claims that as a result of changes in the interest rate (reduction) of income tax from January 1, 2020, household incomes will increase, and Arsen Torosyan [Minister of Health] instead proposes a new type of tax.”

Economist Eduard Badalyan also came out against the idea, claiming six per cent of the health tax would be an additional burden on society:

 “Imagine if a person receives a salary of 500 thousand drams [$1048], then 6% of it is 30 thousand drams [$62], and in annual terms – 360 thousand drams [$755].  And at today’s insurance prices, health insurance is 90-120 thousand drams [$188-250].  In addition, as I understand it, this will be a mandatory fee for working people, and due to this, it is planned to cover all health care costs. In other words, everyone will be insured, for which only those who work will pay.”

According to the expert, if the main goal was compulsory health insurance, it would be better to postpone it a bit:

“I think that this is not the time to apply this approach.  If the state believes that the time has come by some decision to provide free health care for everyone, then at least at this stage it should be entirely at the expense of the state budget.

“In the end, the prime minister says that we have a significant increase in budget revenues, there are no problems with money.  If there is a lot of money, then why should we put an additional burden on people, and why should it be exactly 6%?”

 Social media reaction

The new tax is the most discussed topic in the Armenian segment of the Facebook social network.

Here are some of the comments:

 “At the moment, we have many areas that are exempt from taxes: private taxi drivers, family business. And what, does the minister think that people who work in the tax field, who pay taxes, should provide everyone with health insurance?  Those working in the tax field are not state slaves.”

“Regardless of the many health problems that still have to be addressed, this will be a very acceptable model for all those who are not yet working or retired and are one of us.”

“I use the voluntary health insurance system and I am very pleased with it.  It’s cheaper than what the minister offers us and covers more areas.”

“Mr. Minister of Health, one cannot be so cynical, if only by virtue of the post. Your initiative will not work.  I would like to see the MPs who vote for it.”

“Instead of raising the salaries of doctors, he’s doing all kinds of nonsense.”

“And I consider this innovation very fair!”

“If the initiative itself could be regarded as an unreasonable belief in one’s own strength or simply stupid, then voting in an e-draft is already an obvious scam for which a government official should be strictly punished.  If after that tolerance will be shown to him, then in the future we can expect a return to falsification of the elections.”