The government earned 1,090 trillion rials ($7.26 billion) in tax revenues during the last Iranian year (ended March 20, 2019).
Caretaker of the Iranian National Tax Administration Mohammad Qasem Panahi said the earnings had been estimated to stand at 1,130 trillion rials ($7.53 billion) as per the fiscal 2018-19 budget law, suggesting that INTA met 97% of the target, ILNA reported.
The government’s tax revenues consist of returns from direct and indirect taxation. Direct tax revenues, including “tax on legal entities”, “income tax” and “wealth tax”, stood at 640 trillion rials ($4.26 billion) during the period to register an increase of 15% compared with the year before.
“Earnings from tax on goods and services hit 450 trillion rials ($3 billion), indicating an 11% year-on-year growth,” ILNA quoted Panahi as saying.
CBI Stops Monthly Budgetary Reports
Since past several months, the Central Bank of Iran, which used to publish data on the government's budgetary performance on a monthly basis, has ceased to release such reports.
CBI's latest published reports showed government tax revenues stood at 503.4 trillion ($3.35 billion) in H1 fiscal 2018-19 to register a 16.8% year-on-year increase.
Overall, direct tax revenues stood at 227.6 trillion rials ($1.51 billion) during the period, registering a decline of 1.9% over last year’s similar period.
Tax on legal entities yielded 122.2 trillion rials ($814 million) for the government—12.9% down YOY.
The H1 target in the budget law for tax on legal entities was 207.1 trillion rials ($1.38 billion).
The government collected 88 trillion rials ($586 million) from income tax and 17.4 trillion rials ($116 million) from wealth tax, which show a respective rise of 11.9% and 33.7% YOY.
Indirect taxes, including “tax on imports” and “tax on goods and services”, reached 275.9 trillion rials ($1.83 billion), indicating a 38.4% rise YOY.
The CBI report also showed tax on imports generated 73.9 trillion rials ($492 million), 79.6% more than the year before while tax on goods and services earned the government 201.9 trillion rials ($1.34 billion), up 27.7% YOY.
Taxation Loopholes
The Ministry of Economic Affairs and Finance estimates that tax evasion and avoidance in Iran stood at more than 400 trillion rials ($2.66 billion) or 35% of the total tax revenues of the government.
Poor cooperation between related institutions and agencies can lead to tax evasion. The Iranian National Tax Administration requires different organizations to join the integrated software of the Comprehensive Taxation Plan and make available information needed by INTA to plan, evaluate and control tax operations.
However, there are many organizations and institutions that have yet to upload their information on the database and fail to cooperate with the tax authority.
Banks are among financial institutions that have remained defiant, despite Article 169 of Direct Taxes Law, which requires them to report information of accounts suspected of money laundering and tax evasion.
The INTA chief recently announced that a specialized court will be set up in Tehran soon to only hear tax cases.
The long list of foundations and organizations that enjoy tax-exempt status has also led to expansion of Iran’s informal economy. Such non-targeted tax credits, which constitute 40% of all taxable revenues by institutional and non-institutional entities, have paved the way for abuse and low compliance by other taxpayers, as well as unhealthy competition between economic operators to find loopholes in the tax system.
Value added tax accounts for the lion’s share of total tax revenues in Iran with 23.5%, as per INTA’s figures, followed by corporate tax and import tax. This is while income tax makes up the biggest share of tax revenues in high-income countries. Corporate (company) tax is the second top earner of such revenues in Iran.
Improvement in World Bank's 'Paying Taxes' Score
According to the World Bank's latest Ease of Doing Business Report 2019, Iran's score in "paying taxes" was 56.78, registering an improvement of 4.17 percentage point compared to 2018.
The Doing Business report measures taxes and mandatory contributions that a medium-sized company must pay in a given year as well as the administrative burden of paying taxes and contributions.
According to the World Bank, on average, firms in Iran make 20 tax payments a year, spend 216 hours a year filing, preparing and paying taxes, and pay total taxes amounting to 44.7% of their profit, placing the country in the 149th global ranking among 190 nations.
The World Bank says Iran made paying taxes easier by introducing an online system for filing social security contributions, allowing the possibility of filing value added tax refund claims online, amending corporate income tax returns online and making the payment of additional tax liability at the bank.
