New tax bill on agenda: Armenian Government proposes 'salary-deductible' health insurance

As part of recently initiated tax reforms, the Armenian government is planning to introduce a comprehensive health insurance system to mitigate the employed population's financial burden in benefiting from medical services.

The measure proposes, in particular, deductions from monthly salaries in the amount of 6%, which will be directed to special funds to cover the potential beneficiaries’ health costs.

In the justification document, the authors cite the need to create a sustainable healthcare system “based on the social responsibility of the state, and the society’s social solidarity”, ensuring the necessary protection for all the social groups and providing their finacial accessibility to the main medical services.

If signed into law, the bill will apply also to self-employed citizens.

Under the State Budget, the health insurance coverage is now 106 billion Armenian Drams (AMD 477 = USD 1), with the deficit amounting to AMD 123 billion. The new tax is thus thought to be a gap-bridging measure expected to cover the existing deficit.

The calculation methods are based upon the fundamental principles underlying the effective tax policies. Preliminary estimates suggest that the health tax will not be an extra burden for 41% of the potential beneficiaries (with a monthly income above, or starting from, AMD 150,000). For the rest of the employed population, the uniformity of the revenue tax is expected to be a mitigating factor (under a government-proposed bill, the revenue tax for all the employed individuals will be 20% starting from 2021). The minimum taxable revenue will then drop by 4%, with the estimated 4.6% health insurance tax not expected to negatively affect the total monthly income.  

The draft legal measure highlights also a direct impact on the social relations to rule out uncertainties over the free services guaranteed by the state.

The individuals in the socially vulnerable and special groups will benefit from a uniform package regardless of their social status.

The authors of the bill predict also a highly positive impact on the investment climate, emphasizing foreign investors' strong interest to a have healthy team in their countries of business.