PILLAR 9. Taxation should stimulate development, not penalize production

The tax system is not merely a mechanism for filling the budget. It is a tool that shapes the economic model.

Armenia’s current tax system is built largely on the taxation of consumption and imports. This deepens dependence on imports, weakens domestic production, and increases inflationary pressures.

For a small and open economy, this is a dead-end model.

Tax as a dignified obligation, not an administrative burden

The philosophy of the new tax system is simple: although tax is a constitutional obligation, it must become a dignified duty that promotes production, investment, and exports.

Systemically, this means a shift from indirect taxes to direct taxes, where taxation moves from consumption to the stage of value creation.

Production and exports under a predictable regime

Clear and predictable tax rules will be established for production and export sectors. VAT on imported equipment will be reduced to zero or deferred. Preferential and simplified tax regulations and administration will apply to export-oriented activities and technology investment-related expenses.

A productive business must be able to plan long term.

Fairness not by declaration, but by structure

The new system strengthens social fairness through the introduction of progressive income taxation, a rethinking of the real estate tax system based on market value, and the provision of a level competitive playing field.

The tax burden is distributed according to real capacity, not administrative convenience.

From VAT to simplified taxation

The gradual phase-out of VAT and its replacement with a sales tax will reduce cascading cost increases, ease inflationary pressures, and simplify administration while increasing transparency.

This is especially important for small and medium-sized producers.

Investment incentives for technology

The new system will introduce rules for 30–50% reimbursement of R&D expenses, real accelerated depreciation mechanisms, and investment tax credits.

The goal is to reduce risk and accelerate technological advancement.

Institutions based on predictability

Tax administration will be transformed. In particular, the State Revenue Committee will become a body focused on real risk management and forecasting, with full digitalization and automation. The system of mandatory income declaration will be fundamentally rethought, serving as the foundation for genuine tax awareness.

This will fundamentally change the quality of the state–citizen relationship.

This is the ninth PILLAR of “Wings of Unity.” Armenia needs a new tax architecture that stimulates production, rewards investment, and ensures social fairness.