YEREVAN, Nov. 30 (RFE/RL) - The Armenian government unveiled on Wednesday details of drastic tax cuts which will be a key element of its economic program for next year to be debated by the parliament later this year. The government approved a package of amendments in the existing legislation drafted by the ministry of finance and economy reducing by half the overall tax burden of business enterprises.

Finance and Economy Minister Vartan Khachatrian said last week that this extraordinary move is intended to speed up economic growth and eliminate incentives for rampant tax evasion. The ministry proposes to scrap the existing two-level progressive scale for corporate tax, with the maximum 25 percent rate for profits exceeding 7 million drams ($12,700), and introduce a 20 percent flat rate for all businesses. Companies with annual turnover of no more than 10 million drams ($18,000) would be exempted from the 20 percent value-added tax (VAT). The VAT threshold is currently set at three million drams.

In another piece of good news for the business community, the government will push for a sharp decrease in the amount of social security contributions made by employers. The maximum rate of the pension tax would be reduced from the current 28 percent to a maximum of 15 percent of employees' salaries. Many employers, who routinely underreport the amount of wages they pay in order to lessen taxes, have along complained that the existing rate is too high. They are certain to welcome another government initiative whereby the maximum personal income tax would be slashed from 30 to 15 percent. Individuals with monthly revenue of up to 100,000 drams would have to pay only 5 percent.

These sweeping changes must be approved by the parliament in order to have legal force. The finance ministry estimates that the tax reform would cost the state treasury around 10 billion drams in revenues next year but is optimistic about its long-term positive impact on the Armenian economy.