Government officials have put forth a range of measures to lessen the detrimental impact of the new coronavirus outbreak on economic entities.
The Iranian National Tax Administration is offering penalty abatement waivers for the last Iranian month (Feb. 20-March 19) following the outbreak of the new coronavirus, also known as Covid-19, in the country.
As per a bylaw signed by INTA chief, Omid Ali Parsa, businesses that pay their tax debts by June 20 will be eligible for penalty abatement waiver, which is 90% for manufacturing sector and 80% for the services sector, Mehr News Agency reported.
He also noted that the ceiling on tax revenues for small-scale enterprises will increase from 1,000 million rials ($6,493) to 2,000 million rials ($12,987) for real entities and from 3,000 million rials ($19,480) to 5,000 million rials ($32,467) for legal entities.
Ali Rostampour, another senior official with INTA, says the government has no power to introduce changes in the taxation system, including tax breaks or forgiveness.
“A legal mandate should be issued by the parliament to exempt a business from paying, say value added tax for a six-month period,” he said.
On the other hand, the Ministry of Roads and Urban Development is introducing a package of measures to help transportation and tourism enterprises hurt by the coronavirus outbreak.
“As per the new decision of the Iranian Cabinet, all businesses hurt by coronavirus, including tourism and transportation, will get relief from penalties, including employers that fail to pay insurance premiums and tax in the last month of the year [Feb. 20-March 20],” Minister of Roads and Urban Development Mohammad Eslami has been quoted as saying.
According to his deputy for transportation affairs, Shahram Adamnejad, “All full and empty containers stranded at international borders will be exempt from late fees. Further details in this regard will be announced soon. In addition, business licenses and permits of transportation companies in all sectors will be extended until May 20 to encourage people to stay indoors to avoid contracting the deadly virus.”
Earlier, Deputy Industries Minister Hossein Modarres Khiyabani proposed measures to support small- and medium-sized enterprises in the wake of coronavirus that has weighed heavily on their economic activities in a letter to Vice President for Economic Affairs Mohammad Nahavandian.
The proposed measures include tax and insurance premium forgiveness in the last month of the Iranian year, extended repayment plans and loans to SMEs dealing with the fallout of the coronavirus outbreak, IRNA reported.
Parviz Fattah, the head of the Islamic Revolution Mostazafan Foundation, also tweeted on Sunday that the foundation will waive rents for its commercial real estate in two Iranian months (Feb. 20-April 19).
And last but not least, the Money and Credit Council—the top finance and banking policymaker—agreed on Wednesday to postpone repayment of loans to mitigate the effect of coronavirus on businesses.
The decision came on the heels of calls by manufacturers and business owners struggling with financial problems emanating from the contagious disease, according to a notice posted on the website of the Central Bank of Iran.
As per the MCC decision, borrowers have been exempt from paying their monthly loan installments for up to three months, starting from the end of the ongoing calendar month till May 21.
Borrowers who have to clear their debts in a lump sum have been given a grace period of three months to meet their financial commitments to banks.
The adjustments, however, do not include overdue arrears and merely cover current liabilities.
Banks and credit institutions will not impose penalties or extra fees on borrowers due to the MCC-mandated repayment delays. They also are prohibited from placing customers on the list of defaulters.
Sufferings of Businesses
The recent outbreak of coronavirus (COVID-19) has taken a heavy toll on a wide range of businesses.
From restaurants, catering services and cafés to travel agencies, airlines and cinemas, many have been pushed to the brink. Especially so, when taking into account the damaging effects of sanctions on Iran's economy or the business environment.
"Medical doctors say coronavirus is deadly for people with other underlying medical conditions. The sanctions regime is the same underlying disease that has made coronavirus even more horrendous," presidential advisor, Hesameddin Ashna, has been quoted as saying by IRNA.
According to Zahra Karimi, university professor and economist, the outbreak has aggravated the recession that was initially brought on by US sanctions in the fiscal 2018-19.
“Industrial countries with their booming economies are facing a significant decline in their gross domestic product following the coronavirus outbreak. This comes as the impact of the epidemic has been doubly destructive for the economy, which has been already enfeebled by US sanctions,” she added.
Karimi noted that the country’s financially-wobbly businesses have to cut down their spending under the conditions, but the hardest-hit will be those with payday jobs.
“In fact, workers with unofficial jobs who account for a significant share of the labor market are suffering more than those engaged in official economy. With fewer people on streets, the demand for taxis and ride-hailing services has declined as well. Independent business owners who have rented their commercial spaces can’t even afford to pay their utility bills," she was quoted as saying by the Persian-language daily Iran.
Noting that the last month of the Iranian year has always represented growth in business activity, the economist said, “Such a growth has now turned into recession. Service industry workers, like those in restaurants, retail and the gig economy, are much less likely to have paid sick days, the ability to work remotely or employer-provided health insurance. A day off work means a day without pay. The viral outbreak has resulted in limited demand for migrant workers who offer home cleaning services and earned a good pay at least for a short period of time.”
If the current trend persists, Karimi added, bankruptcy filings are bound to increase.
“Official statistics show a 0.3% decline in the number of insurees in the fiscal ending March 2019, which suggest that the number of jobs offering insurance has decreased and instead the number of unofficial, temporary jobs has increased. The outbreak of coronavirus will raise unofficial employment and the government has little maneuvering room to tackle the negative effects of this crisis due to the financial constraints imposed by sanctions and the FATF blacklisting,” she said.
“As per the budget bill for the next fiscal year [March 2020-21], 17% of the government’s total budget will be spent on keeping pension funds afloat. The government, which is struggling to pay pensioners and provide operating expenses of the country, has virtually nothing to compensate for the losses caused by the spread of coronavirus. Under the circumstances, if it opts to pay cash subsidies to people, the growth of spending beyond the growth of productive capacity is bound to intensify the inflation rate,” she concluded.
