Import tariff regulations will be further simplified in the next Iranian year (starting March 20), as the government seeks to spur international commerce and do away with bureaucratic traps, the Cabinet declared on Sunday.
The ease of imports and exports is hoped to help revive Iran's economy while bringing it closer to becoming a full member of the World Trade Organization.
Import duty categories will be cut to eight instead of 10, making identification and calculation of duty rates easier and quicker. The President Hassan Rouhani administration also cut the number of categories by four the year before, from 14 to the current 10 groups, Mehr News Agency reported.
"Applying tariffs was a complicated process in the past due to the large number of import categories. Many merchants had difficulty in finding the tariff rate for the goods they were importing," said Mohammad Reza Modoudi, the deputy head of Trade Promotion Organization of Iran.
The minimum tariff rate is 4% to which a 1% general import duty is added. So the least you would have to pay the government to import something into Iran is 5%. The other seven groups get charged 10%, 15%, 20%, 26%, 32%, 40% and 55% for imports.
Tariffs are double-edged swords. On the face of things, they increase the price of foreign-made goods, making domestic ones more attractive and changing people’s consumption patterns in the process.
However, on some goods, they may actually increase the cost and lower its quality. High tariffs also stifle competition and breed monopolies.
The best example for this is perhaps seen in Iranian automotive industry where import tariffs have long remained prohibitively high. Iranian carmakers, mostly government managed, have had a free hand in Iran’s car market, without having any competition.
Still, next year, car importers will have to pay a 55% in duty—the highest permissible rate. Also, cars with engines bigger than 2.5 liters are completely banned, as they are deemed “luxury”. Still, the top-end tariff rate has been cut by 20 percentage point from 75%, so foreign cars are expected to become cheaper next year.
“Tariffs are limitations imposed to manage imports and they are used around the world to support domestic production,” said Modoudi, defending the high tariffs charged by the government.
However, if Iran’s government wants full membership in WTO and wants trade to pick up, it needs to ease regulations and lower the wall of tariffs further.
Iran officially submitted an application to join WTO in 1996. The United States consistently blocked Iran’s bid to join the WTO since Tehran first asked for membership.
In 2005, Iran’s application for WTO membership was approved unanimously by the organization’s members as a goodwill gesture so as to ease the nuclear negotiations between Iran and the international community.
Iran is now a WTO observer member that has applied for full membership now, but approval calls for streamlining trade regulations and operations.
