The tax-to-GDP ratio rose from 5% in 2013-14 to 6% in 2018-19, indicating a 20% growth, according to a report released by the Plan and Budget Organization.
The announcement was made on the occasion of "Government Week" in Iran (from August 24 to 30).
President Hassan Rouhani first took office in 2013 and was reelected for a second four-year term in the fiscal 2017-18.
The report also shows the share of tax revenues in the general budget increased from 33% in the fiscal 2013-14 to 36% in the fiscal 2018-19, indicating a 9.1% growth, IRNA reported.
The PBO noted that the increase in tax revenues follows a decline in the share of petrodollars in the government budget.
The share of tax revenues from government spending grew 7.8% from 42% in the year Rouhani took office to 45.3% last year (March 2018-19).
According to the Iranian National Tax Administration, the government earned around 1,090 trillion rials ($9.81 billion) in tax revenues during the last fiscal year that ended on March 20, 2019.
The earnings had been estimated to stand at 1,130 trillion rials ($10.18 billion) as per the fiscal 2018-19 budget law, suggesting that 97% of the target were reached.
Direct tax revenues, including “tax on legal entities”, “income tax” and “wealth tax”, stood at 640 trillion rials ($5.76 billion), registering an increase of 15% compared with the year before, he added.
Earnings from tax on goods and services hit 450 trillion rials ($4.05 billion), indicating an 11% year-on-year growth.
The share of tax revenues from general budget resources increased from 33% in the fiscal 2013-14 to 36% in the fiscal 2018-19, indicating a 9.1% growth
According to Minister of Economic Affairs and Finance Farhad Dejpasand, latest reports show the government earned more than 240 trillion rials ($2.16 billion) in tax revenues during the first quarter of the current Iranian year that began on March 21, indicating a 28% rise compared with the corresponding period of last year.
A total of 1,400 trillion rials ($12.61 billion) have been projected in tax revenues this year (March 2019-20).
According to Omid Ali Parsa, the head of INTA, tax evasion in Iran stands at 300-350 trillion rials ($2.34-2.73 billion).
The Ministry of Economic Affairs and Finance estimates that tax evasion and avoidance in Iran stands at 35% of total tax revenues of the government.
INTA is setting up a specialized court to hear tax cases in Tehran.
Value added tax accounts for the lion’s share of total tax revenues in Iran with 23.5%, as per figures released by INTA, 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.
INTA Moves to Modernize Taxation System
Parsa said INTA is moving to modernize Iran's taxation system based on verifiable information about the status of taxpayers.
"How can we provide for social expenses, including keeping order and security, education, healthcare and the myriad infrastructural projects across the country?" he said.
"There are basically two ways: Either by levying taxes proportionate to incomes and consumptions, which are in line with social justice, or printing money, which results in inflation, which is in turn a type of tax whose pressure is felt by low and middles class strata of the society, the retired and less fortunate citizens."
He stressed that the need to reform and modernize Iran's taxation system is now more urgent than ever, as US unilateral sanctions have targeted the country's export revenues.
Echoing a similar line, Economy Minister Dejpasand says the current circumstances under economic sanctions are a blessing in disguise for Iran to improve its taxation system.
"In advanced countries, 25% of people’s total income go to taxes. This rate stands at 8.5% in Iran," Parsa said, adding that should Iran seek to follow the example of developed countries in terms of a just taxation system, INTA needs to have all-out access to financial turnovers, property deals and assets.
Expanding the tax base, fighting tax evasion and improving transparency in taxation process are missions set for the chief taxman by President Hassan Rouhani.
INTA to Enforce Green Tax
Tax will be levied on products that cause environmental damage in their manufacture or use, Mohammad Masihi, an official with the Iranian National Tax Administration, said recently.
As per the budget law of the current fiscal year (March 2019-20), he explained, a 2% tax will be imposed on domestically manufactured paint, coating, primer, tires, tubes, plastic and electronic toys, containers made of plastic, polyethylene terephthalate and melamine.
Imports of the above-mentioned products will be subject to a 3% tax.
“Locally-produced light bulbs, except for SMD/LED, will be subject to a 3% tax, while a 4% tax will be charged for their imported counterparts," he said.
“A 3% tax will be imposed on domestically manufactured computers, audiovisual equipment and cellphones, as well as linoleum, cellophane and nylon. Importers of these products will be required to pay a 4% tax."
Environmental tax, also known as green tax, pollution tax or eco-tax, refers to a wide range of legislative charges on businesses and private individuals, aimed at reducing practices that cause damage to the environment. There are many forms of environmental tax, some of which are aimed at penalizing those who emit harmful chemicals and some of which are aimed at rewarding those who employ environmentally-friendly practices.
Green taxes give legislators and policymakers a powerful instrument for environmental protection that supplements existing regulatory strategies. While regulatory mechanisms are used by government to lessen environmental damage by restricting or banning certain products and activities, green taxes seek to achieve the same goals through economic incentives. The popularity of this approach to environmental problems has led many European nations to enact green taxes in recent tax reforms.
For Iran, though, besides the environmental issue, the move could come in really handy as the government is looking to wean off petrodollars under tough US sanctions imposed on Iran's oil sales.
In fact, ever since the reintroduction of sanctions, increasing tax revenues has been brought up as a key measure to boost finances in the Islamic Republic.
Improvement in World Bank Report
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.
Using a case scenario, the Doing Business report measures the 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 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 payment of additional tax liability at the bank.
