The price of luxury: real estate tax spikes in Armenia
Armenia has decided to change the tax code regarding property taxes. Parliament has already adopted the amendments in the second and final reading.
They will gradually begin to come into effect in 2021. Within six years, the tax will increase 5-6 times, and on expensive apartments and houses, it will increase tenfold.
This is now one of the most hotly debated topics among Armenian communities on social media. Opponents of the amendments even organized a social movement on Facebook. MPs from the ruling bloc not only responded to participants on Facebook, but also plan to meet with them in parliament to discuss and explain the situation.
More details on how much citizens will pay in 2026
What is being changed?
The real estate tax in Armenia is currently quite low, and is calculated using the cadastral value of housing. The new bill proposes to change the way real estate tax is calculated, by using the market price instead.
Deputy Finance Minister Arman Poghosyan stated that the potential of real estate tax in Armenia is undervalued 5-7 times. The problem, he said, is that the established tax rate on cadastral value is several times smaller than that calculated using the real market one. As for payments, they “will be returned to citizens in the form of quality services,” since the tax money will be allocated to community budgets, assures the deputy minister.
Authorities say that four years after the new system is implemented, property tax revenues will have increased almost 5 times. They are currently around 9,000,000,000 drams (almost $19,000,000).
The changes will occur gradually, over the course of six years. In 2021, the population will pay 25% of the tax, in 2022 – 30%, in 2023 – 35%, in 2024 – 50%, in 2025 – 75% and only in 2026 will citizens pay the full tax amount.
Arman Egoyan, member of the ruling My Step Alliance, commented on the new amendments:
“We will calculate the new property tax rate using 80% of the market price of the property. In other words, if the market price of an apartment is 50,000,000 drams [more than 100,000 dollars], then the owner must pay taxes on a property with a value of 40,000,000 drams.”
Since the amendments caused such a stir in society and become so hotly discussed on social networks, the MP also posted a scale which citizens can use not only to find out how much they have to pay for their property, but also how much housing is available in the country and for what price.
Arman Yegoyan drew attention to the fact that there are not that many expensive pieces of property in the country on which people will have to pay large taxes:
“There was a lot of talk about apartments with astronomical prices owned by single retirees. What do you think, how many of these 10,000 apartments [referring to housing estimated at 60,000,000 drams and higher – JAMnews] belong to single pensioners, and how many belong to to employees or businessmen whose income tax and income tax were reduced by 5.1 percent this year (and will be reduced again by one percent next year).”
The amendments were subjected to sharp criticism by the parliamentary opposition, who said that this proposal, especially in the context of the coronavirus pandemic, will only worsen the social situation of citizens.
“As a result of the proposed amendments, property tax will increase an average of 3-4 times, and these tax hikes will touch all areas of the real estate sector. In addition, the law does not take into account the social components [of this decision],” said Mane Tandilyan, a deputy from the Enlightened Armenia faction.
Memes against tax hikes
On June 26, Armenian Facebook users launched a started a social media movement in protest of the new amendments.
Well-known journalists, actors, and public figures in the country all joined in.
Participants posted their personal photos on their pages and sign it with the same text:
“Dear native residents of Yerevan, if you don’t discuss about your rights now, then tomorrow you will be forced to give up your apartments and houses. This is the new form of expropriation or alienation of real estate which we are inheriting. Think about the future of your children. Join this movement, post a photo with this text on your Facebook wall: “The new property tax will deprive the native residents of Yerevan of their property. I am a native of Yerevan and this is my city.”
The movement did not go unnoticed. Ruling My Step Alliance MP Babken Tunyan immediately reacted to the posts and invited participants to discuss the matter in parliament.
On his Facebook page, he proposed that those who oppose the change elect 5-7 representatives to present their common point of view. At the same time, the MP warned that the discussion would be transparent and honest:
“I myself do not divide the people into natives and non-natives: the law is the same for everyone. My invitation is addressed to those who consider themselves to be an indigenous Yerevanian and believe that this circumstance should play some role in this matter.”