The BizProtect was informed about business activities carried out in unequal competitive conditions in the economic field. The alarm was related to the organizations providing taxi services.

Armen Tamazyan, President of the "Support to Taxi Services" NGO, had submitted the report, where hjad identified a number of legislative and practical issues that exist in this field and have not been resolved. He specifically noted:

"I would like to announce the most important issue related to passenger transportation in the field of taxi services. In particular, first of all, the existence of an unequal field of competition for years. A number of online taxi services operating in the field of information technology do not pay other taxes for their activities, and are paying exclusively turnover tax. Today, in our business environment, in addition to online taxi services and individual taxi drivers or taxi drivers who have declared themselves individual, other taxi services pay income tax and patent fees properly, and also the state duties provided by the RA legislation, according to the relevant licensing type. ” 

The expert team of the BizProtect, studied the facts presented in the application and analyzing the legislation, came to the following conclusion. It turns out that taxis working with online applications pay turnover tax only. Meanwhile, according to the RA Law on Licenses, organization of passenger-taxi transportation in the field of transport is a type of complex procedure licensing, for which other types of taxation and other amounts of state duty are envisaged.

In particular, the RA Law on State Duties stipulates a state fee for licensed activities in the amount of 200,000 AMD per year for IEs and organizations with more than 4 taxi cars, and in the amount of AMD 100,000 for IEs and organizations with up to 4 taxi cars. 

It is obvious that the taxi companies working with the application have more than 4 taxi service cars, but they do not pay the corresponding annual state fee for the license. On the other hand, the question arises as to whether this provision applies to them, as the cars do not actually belong to taxi companies or organizations that provide taxi services. They only connect the passenger with the taxi driver. At the same time, the organizations providing taxi services working with the online application do not sign employment contracts with their drivers, so they do not pay income tax. 

Based on the above-mentioned article of the RA Tax Code, the patent tax applies to the implementation of passenger transportation by car. It is clear from the above-mentioned article that the object of taxation with a patent tax is the transportation of passenger by car. In the sense of application, passenger transportation by a light passenger car is considered to be a transportation of the passenger by a light passenger taxi car. In other words, the actual type of patent taxation includes passenger transportation provided by taxi service companies. However, again, according to the appendix, the organizations providing passenger transportation by light passenger cars do not pay the patent tax for the activities that are the object of patent taxation. 

Armen Tamazyan noted regarding legislative regulations "From legislative aspect, there is the Law of the Republic of Armenia on Licensing, which is in force, but in fact it does not work. As a result, taxi services are closed, and the issue of whether taxi services are necessary or not is not raised. Drafts are constantly under discussion, but none of them are accepted. Now we are facing a situation where they have been trying to solve this problem for about five years, but neither the old law is working nor does the draft come into force. As a result, the businessmen of the taxi service companies are going bankrupt and are afraid to make new investments in the new Armenia, where the investments by the businessmen are encouraged. Due to the legislative gap, we are facing a collapse. Please, respond to this question as soon as possible, as this becomes terrible in the business environment, it leads to the immediate cessation of the activities of a number of domestic organizations. I would like to inform you that in order to solve the problem quickly, I am ready to organize working meetings, submit proposals, solutions and changes related to taxation and licensing.” 

Summing up the concerns presented by the organization involved in business interests, it should be noted that in this field of business, taxi services, which operate on the basis of a license, pay taxes and state fees are closed, whereas the organizations providing passenger transportation with the application, do not pay, as they do not have the status of a business/conomic entity providing taxi services from the legislative point of view. Therefore, the BizProtect submitted letters to the RA Commission for the Protection of Economic Competition and the RA Ministry of Transport, Communication and Information Technologies with the expectation of a radical and systematic solution to the problem.

In response, he replies were received from the above-mentioned two departments, stating that a systemic solution was planned to be provided to the problem. The submitted proposals are in the implementation phase, in particular, the Ministry of Territorial Administration and Infrastructure of the Republic of Armenia has developed a draft law, and information on which was provided on 27 February during the public hearing entitled "Current issues of road traffic and their solutions." It is planned to present it by June of this year. The draft provides solutions to the problem raised. In particular, 

A)  Online taxis should cooperate only with licensed drivers. Otherwise, they will be held administratively liable and fined.

B) Taxi licenses must be sorted. The Draft Law has defined the following types of licenses:  
- A license for individuals will be free, drivers holding such license will not have the right to act in a mediated manner, or cooperate with online taxi services; but they have to find their customer and work only directly, for example, finding a customer on the street.

- License, which can be obtained only through the organization, and act as a sole proprietor or through cooperation with an online service LLC. 

C) State duties will be reduced. The fee for each car will be up to 20,000 AMD per year.

We hope that this draft law will be approved soon, and as a result the unequal competitive conditions in the sphere will disappear. 

The BizProtect.am website operated by the Armenian Lawyers’ Association (ALA) is a whistleblowing platform targeted at corruption and any other issues, risks and issues that impede business activity. This site also provides opportunity for anonymous alerts. Appropriate steps are being taken to verify the authenticity of alarms and provide solutions.