Tax reforms will cause problems for small and medium-sized businesses — Alpha Economics

Small businesses can face really big problems due to the tax reforms expected in 2025. First of all, we should note that the turnover tax rate will double for all economic activities.

It should be noted that even though the rate doubles, depending on the types of economic activity, the tax burden may increase very little and, in some cases, decrease.

Although the tax rate will double, the possibility of deductions from expenses will also increase, and the mandatory minimum tax threshold will be lowered.

If we assume that the turnover of an entity operating in the food service is 200,000 drams, then the current 6% tax is 12,000 drams; the deductions are 3% of the turnover, 6,000 drams. The difference is 6,000 drams, but the tax should not be less than 4% of the turnover from interest, which is 8,000 drams; therefore, the tax burden is 8,000 drams.

After the change, with the same calculation, the tax burden will become 7,000 drams, that is, less. But there are several important circumstances that can cause problems.

First of all, the given example is the ideal case when one can fully document the achievements and thereby have such a large number of deductions. In this case, the question arises: how objectively is it possible to document all this?

On the other hand, in the case of a high operating margin, where acquisitions are much less than turnover, the deduction will be small, so the tax burden will be large.

Ultimately, with larger businesses engaged in the same activity, small businesses will end up in even more unequal competitive positions, which causes institutional problems for this area.