Excise taxes on drugs may cause surge in market, says importers' union chief
Tert.am has talked to Samvel Zakaryan, the president of Medicine Producers and Importers’ Union, over the impact of a government decision to impose excise taxes on the purchase of drugs.
Do you think the government measures in the pharmaceutical industry are justified given that this is a priority sector?
They are justified; we would simply expect more active measures. In terms of the strategy timing, our sector is the best. and it is one of the first in terms of the activities accomplished. We are very actively working with the Ministry of Economy and the Industrial Development Foundation. The result was that the pharmaceutical sector had the highest records, with 29.8 percent production growth and 25.8 percent export growth.
Do you observe changes in the new government or do they pursue the predecessors’ [policies]?
No, it is an absolutely different work style. What particularly surprised us was that the reforms are implemented without any discussions with us, with our opinion remaining overlooked. For instance, the document on approving simultaneous import procedures was put forward to the private sector all of a sudden.
What will you say about the new reforms that call for imposing excise taxes on medicines?
That’s the other problem we face; the [amended] law “On Trade and Services” envisages excise taxes also for medicines, apart from soap, make-up products and other items. That’s a non-professional approach, because drugs, as a specific form of product, should [be imported] based on specific procedures. As a result, drugs too appeared on that list on grounds of combating the shadow economy. Over one million drug packages, with different sizes and quality, are imported to Armenia, so it is important to excise all that, as we deal with considerable expenses. If the package includes 60 pills while the patient wishes five, for example, that would violate the excising procedures. Our patients will not buy all 60; they will take 5 [pills] and throw away all the rest. The excise tax costs may cause a surge in the prices of medicines.
It is argued to be a method of combating the shadow.
The excision will offer no benefits at all; it doesn’t make any sense in the case of medicines. There are special surveillance procedures for pharmaceutical products, as it is, with every single vial being registered during the import. So shadow activities are practically ruled out. If drugs used to be smuggled from Georgia, then it is necessary to take action against that; official importers cannot carry out a shadow import. Excise offers wide opportunities to smugglers; they may tear the label from a drug sold for 10 Drams and stick it to a 10,000 Drams worth drug imported without registration. Official importers work in a coordinated manner, so they cannot act in the shadow. It is necessary to fight smugglers instead of dismantling the accomplished market through experiments. There are no procedures of the kind in European countries.
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