Small businesses in Armenia cannot withstand tax terror

The number of organizations has decreased in Armenia. What are the reasons, and what can we expect in the future?

Let’s start with statistics. In December 2024, the total number of companies was 70,560. By March of this year, the figure dropped to 66,955. That is, within three months of this year, 3,605 organizations ceased their activities.

What could be the reason? Actually, the beginning of the year is an economically relatively passive period, compared to the end of the year. And this reason is certainly present, but the problem is that, compared to March last year, the number of organizations also decreased (by 1,371), which indicates that the decline isn’t solely due to early-year passivity. In situations like this, we need to take a broader view to understand the current developments in the economy. And the current trend in our economy is to cancel out external influences with their negative consequences.

Notably, if you look at the statistics on the number of organizations over a longer period, you will notice that right after 2022—in 2023 and 2024—the number of organizations increased dramatically due to external factors. Companies were founded by relocated entrepreneurs, and economic activity in certain industries spiked. Naturally, the reversal of these external influences has affected the current picture, likely contributing to the rising number of closures.

But is this the only reason we are dealing with? Statistically, both in the first quarter and year-to-date figures, there has been a sharp decline in the number of micro-businesses. This is due to the new, tougher tax policies, which we predicted earlier, noting that small businesses may not be able to withstand.

It turns out that among SMEs, a significant decline has been recorded, especially among micro-businesses. This is not happening by chance. This situation gives the right to assume that small businesses simply cannot withstand the tax terror.

So what to expect in the future? We can assume that this is the fastest reaction of the market, and as such, at this stage it has mainly affected the smallest businesses. In addition, the newly tightened tax regulations currently include certain exemptions and deadline extensions, making further downturns predictable.

Taking all this into account, it is fair to ask: will this policy serve to ensure quick budget revenues, or will it lead to the constant closure of organizations?