Thursday, May 8 2014

 The pension tax may be added to the income tax to replace the accumulative pension system, Vardan Ayvazyan, an MP from the ruling Republican Party of Armenia, the Head of the Parliament Committee for Economic Affairs, told reporters, Wednesday.

"It is quite probable that the income tax will be reduced from 25% to 20% to transfer these 5% to the accumulative funds. As a result, the pension reform will not affect the incomes of the citizens. However, this is only one of the probable ways to resolve this problem," Ayvazyan said. " Since the Constitutional Court has recognized the mandatory component of the pension system unconstitutional, the citizens are free to decide whether to make payments or not. Those who have already made payments can write an application and demand their money back," he said. Nevertheless, the Republican parliamentarian said the pension system is still vulnerable and needs reform.  "45 thousand cannot satisfy the needs of pensioners. So new solutions are needed," he said.

However, the Finance Ministry of Armenia replied to ArmInfo's request over the issue saying that no changes in the system of mandatory pension payments are expected until September 2014. "These funds are automatically transferred with a special program and nothing can be changed." They in the Ministry said. Asked if it is possible to stop the process through a special application to the Ministry, the parliamentarian replied negatively.

On April 2 the Constitutional Court (CC) of Armenia cancelled the mandatory component of the accumulative pension system. Head of the Constitutional Court of Armenia Gagik Haroutiunyan read out the CC's 64-page verdict on 2 April.  The Constitutional Court adopted a decision to recognize the law null and void in the parts that infringe the citizen's right to manage his own salary. The CC has recognized invalid all the disputable articles of the law, as they are interconnected. The CC has announced 30 September the deadline for the Government and the Parliament to bring the law in line with the requirements made. The decision of the CC comes into force at the moment of announcement.

However, Felix Tokhyan, a member of the Constitutional Court, says the Law on the Mandatory Accumulative Pension System will be valid till 30 September, and the citizens are reluctant to continue making pension payments to the accumulative funds.

Meanwhile, a number of lawyers and opposition politicians consider that after the Constitutional Court's verdict the employers and employees no longer have to make pension payments. Moreover, they say that from now on the payments will be made on the voluntary basis only.
Meanwhile, Prime Minister Hovik Abrahamyan promised a decision on the pension reform that will meet the interests of all the parties concerned till July 2014.