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Armenia property tax reform raises gentrification fears

by Umberto Bacchi | Thomson Reuters Foundation
Saturday, 4 July 2020 14:23 GMT

A couple embrace at a viewing point in the city of Yerevan, Armenia September 9, 2019. REUTERS/Anton Vaganov

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Armenian bill to tax the rich will penalise Yerevan pensioners, critics say

(Adds comments from finance ministry, musician)

By Umberto Bacchi

July 4 (Thomson Reuters Foundation) - A property tax rise in Armenia risks forcing elderly people from homes they have lived in since the Soviet era and which have risen dramatically in value since then, critics have warned.

The reform was signed into law this week and will bring thousands of homes that were previously exempt because of low historic valuations into the tax system.

But critics including the Armenian president say the hike penalises older people who are not rich but took ownership of apartments in the centre of the capital Yerevan when the country moved from Communism to a private property system.

"It's going to be a huge burden for a lot of elderly people," said Mark Grigorian, a Yerevan-based journalist who co-authored one of several petitions calling for changes in the law.

"These people will be forced out of the places, out the flats where they were born, where they spent all their lives, which is a tragedy."

Vahan Artsruni, a 55-year-old musician who launched a Facebook campaign opposing the bill, said he feared he would have to sell the flat his family inhabited for generations and move to the suburbs.

"I'm freelance artist ... and I have unstable income," he said, adding that other artists, intellectuals and scientists might also have to move out, changing the face of a city that has so far largely resisted gentrification.

Armenia's ministry of finance said that criticism of the law was largely based on "emotions" and "incomplete perceptions" of the new tax system, but added that it was open to bring in changes if needed.

"Our calculations based on the typical apartments and houses show that the increase in tax is not so big that owners will have to sell their properties and buy new, cheaper ones," a ministry spokeswoman said in an emailed statement.

Under the current system, properties in Armenia are taxed based on their land registry value, which is often much lower than the market price.

More than 60% of Armenia's flats are tax exempt, according to lawmaker Babken Tunyan, who heads a parliamentary committee on economic affairs.

The reform, which will be phased in from January, scraps an exemption for low-value homes and introduces a progressive tax based on market value.

The owner of a $80,000, 120-square metre flat in central Yerevan who currently pays around $19 a year would owe about $100 after the reform kicks in.

The average monthly salary in the country is around $380, according to official estimates.

"The idea here is to impose a higher tax on the wealthiest of society, property owners who have gotten away for too long with very, very low property tax," said Richard Giragosian, director at the Regional Studies Centre, a Yerevan think tank.

"(But) a lot of the people who now own the most lucrative property in the city centre are pensioners," he told the Thomson Reuters Foundation by phone.

Armenian President Armen Sarkissian has described the move as "untimely" due to the economic woes caused by the coronavirus pandemic, but said he lacked the authority to veto it.

Sarhat Petrosyan, an architect who advised the government on the reform as the head of Armenia's Cadastral Committee up to October last year, said concerns surrounding the bill were "exaggerated".

"I live in the centre of Yerevan and my apartments market value is $150,000 and I pay annually about $50 property tax. (For) my car, which costs maybe $20,000 I pay $70 property tax," he said. "It's not normal to have that kind of gap."

The government could amend the legislation to allow people with low incomes to postpone payment of tax due until they sell the property, he added. (Reporting by Umberto Bacchi @UmbertoBacchi, Additional reporting Nvard Hovhannisyan, Editing by Claire Cozens. Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers the lives of people around the world who struggle to live freely or fairly. Visit http://news.trust.org)

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