Standing Committee on Economic Affairs convenes parliamentary hearings to debate new legislative package regulating IT sector

For the companies with up to 30 employees in the field of information technologies, an income tax and profit tax privilege was established for a certain period of time, which was extended for another year. In parallel with that process, an agreement was reached to develop more long-term, predictable, complete regulations that maximally balance the interests of the sector and the economy. The Deputy Chair of the NA Standing Committee on Economic Affairs Babken Tunyan underlined this during the parliamentary hearings convened on March 5. At the core of the debates was the new legislative package regulating the sector of information technologies.

Babken Tunyan informed that during the discussion with the RA Prime Minister, there was an agreement to create a working group on this issue. It is planned to have the above-mentioned initiative by the middle of this year. Before officially circulating the document, the Deputy Chair of the Committee highlighted the debate with the officials of the sector.

The RA NA Vice President Hakob Arshakyan gave a welcome speech. Noting that the development of the sector has no alternative and serious steps are being taken for it, he opined that this public debate also proves that. In this context, the NA Vice President highlighted the creation of the science and technology development council attached to the Prime Minister and the steps and priorities implemented within its framework.

“It is obvious that we cannot have leap achievements in all directions, but it is clear that by targeting specific sectors, we have such an opportunity,” Hakob Arshakyan stated.

Touching upon the legislative regulations, the Vice Speaker of the Parliament opined that the law should not be about privileges, it should have stimulating directions that will lead to qualitative changes in the spheres of education and science. As an example, he pointed out the connection of the mortgage market with the income tax people pay. According to Hakob Arshakyan, we stimulate investments with the return of income tax, and investments in the field of science and education can also be such incentives.

The RA Minister of High-Tech Industry Mkhitar Hayrapetyan also gave an opening speech at the hearings. He thanked the Standing Committee on Economic Affairs for initiating such hearings. “This is an extremely important initiative for us, the IT community, because we are at the stage of making the most important decisions,” the rapporteur underscored.

According to Mkhitar Hayrapetyan, having a legislation promoting the development of the IT sector is a strategic goal. It was mentioned that the mission of the Ministry is to ensure quality dialogue between the Government and the community, properly coordinate the issues of concern to the parties, and create a constructive atmosphere.

According to the Minister, the development of the IT sector is not the property of the specialists in the field, the state should be by their side with various toolkits and mechanisms.

In his speech on behalf of the Union of Employers of Information and Communication Technologies (UEICT), Armen Balderyan emphasized the organization of such hearings. The rapporteur spoke about the importance of Armenia becoming a high-tech country, and expressed his willingness to assist in the development of sectoral laws and strategy along the way.

According to the President of the Engineering Association Aram Salatyan, the adoption of the legislative package will promote the leap development of the field.

The representative of the working group created by the IT community Sevak Hovhannisyan presented the analytical document elaborated by the group.

In 2022, the turnover of the sector reached 589 billion AMD or 1 billion 400 million USD. The sector grew by 47.5% annually between 2018 and 2022, while the gross domestic product (GDP) grew by 9% annually. Such rapid growth contributed to increasing the role and importance of the sector in the economy, and the ratio with the GDP reached up to 7%.

It was noted that the tax privileges were an additional incentive for the growth of the IT sector. The average salary is also high here. In 2022, it amounted to about 1 million AMD, which is 3.8 times higher than the average salary of the republic.

It was pointed out that the salary fund in the sector is 770 million USD.

Sevak Hovhannisyan talked about the internal and external challenges facing the sector.

The Committee will participate in data collection, verification, comparison and monitoring activities within the framework of the law. Within the scope of this information, the Ministry will maintain an administrative register.

The rapporteur detailed the possible support measures. “It is important to understand that the law does not link the development of the sector to the return of taxes, but first of all to the direct participation of the state in relation to the most effective and progressive spending in the sector,” he said.

During the Q&A session and the speeches, the participants of the hearings talked about the strategy for the development of the IT sector and the necessity to have qualified specialists in the labor market. Opinions were voiced regarding clarifying, editing and correcting some provisions of the legislative initiative. Increasing investments in the fields of science and education has become important. The speakers specifically mentioned the outflow of the best specialists from the sector to other countries offering better business environment and conditions as a challenge facing the sector, to stop which it was considered necessary to take immediate steps.

The speakers presented proposals and remarks regarding the field, it was also noted that the title of the initiative does not express the content of the law. It was also suggested to consider what will happen to the 4.000-5.000 companies that consist of 1 person and do not pay any taxes or mandatory fees.

The Deputy Chair of the NA Standing Committee on Economic Affairs Babken Tunyan emphasizing such effective debates in having quality legislation, expressed the opinion that the IT sector is of special importance for the country: It does not only serve its own interests. The high-tech sector, for example, can be reflected in medicine, industry and elsewhere and contribute to the growth of the economy and the development of society. According to the Deputy Chair of the Committee, careful and balanced steps are needed in this sector. “Tax policy of any sector, if different from other sectors, is discrimination. There can be positive discrimination, there can be discrimination that will bring greater benefits in the future, but it should be validated as much as possible,” the deputy said.

According to Babken Tunyan, the important thing is how much we will spend as a state and how much we will get back. ‘If we move from information technologies to high technologies, we are not talking about a few billions, but tens of billions. Basically, this is a redistribution of funds, we need to understand what the state will get from the redistribution of these funds,” he emphasized. The Deputy Chair of the Committee expressed hope that the debates will be continuous and more complete and predictable solutions will be recorded.

The deputy of the NA Civil Contract Faction Khachatur Sukiasyan referred to the tax administration implemented in the sector and its effects. The deputy highlighted the presence of highly qualified specialists in the field. According to him, should they be trained on the spot, or should the existing specialists be brought to our country, giving them a competitive platform? “Problems will be solved only if a more competitive platform is created in the sector,” he underlined.

According to the RA Deputy Minister of Finance Arman Poghosyan, during the hearings, various valuable ideas were heard, which will be important in the context of making the upcoming decisions. “Ultimately, we should have a consensus on what factors are and to what extent they affect the prospects of the sector’s development,” the rapporteur underscored.

Arman Poghosyan spoke about the provision of tax privileges in the sector, noted that the taxation bases created in the sector are the future taxes and the sources of expenditures.

The Deputy Minister spoke about having a stable and predictable tax environment, expanding the taxation base as a result of the amendments. “We are planning to have such a legislation that will allow us to register the copyrights created in our country.”

In his final speech, the Minister of High-Tech Industry Mkhitar Hayrapetyan referred to the concerns raised: the adoption of the law after the strategy or vice versa. He considered it institutionally unacceptable to have sectoral legislation without a strategy. At the same time, referring to the issue of debating the law on an extraordinary basis, he noted that the problem here is faced with the competition component.

“These are debates about the future, they are investments in the security of our state, the future of our children, military industry, and talent,” the NA Vice President Hakob Arshakyan stated in his final speech.

Concluding the work of the hearings, the Deputy Chair of the Committee Babken Tunyan expressed readiness for further cooperation. According to him, the started process can become a good example of effective regulation with the cooperation of the unions, associations, private sector, the executive and legislative bodies.