Iranian lawmakers are studying a draft bill on the introduction of a capital gains tax to control the auto market that has experienced a sharp price hike in tandem with the upward forex rate trajectory over the past few months.
“To curb soaring car prices and ease public resentment, Iranian officials and MPs have proposed solutions for regulating the market. The latest move involves a proposal to introduce capital gains tax in the auto market,” Caretaker of the Iranian National Tax Administration Mohammad Qasem Panahi told ICANA.
A capital gains tax or CGT is a tax on the profit realized on the sale of an asset. The most common capital gains are realized from the sales of stocks, bonds, precious metals and property.
Panahi said Majlis Economic Commission has ratified the outlines of the capital gains tax draft bill. He noted that INTA has extensively studied levying capital gains tax in various fields, including the automotive market.
“Hopefully, a bill on the matter will soon be introduced by MPs,” he said.
Rising Prices
Following the reimposition of harsh US sanctions against Tehran, prices of all commodities, including vehicles, have gone through the roof in Iran.
Amid economic tensions fueled by an inflation rate unseen in recent memory, Iranians have been converting their savings into hard currencies and safe haven assets, including gold coins and cars.
The soaring demand for cars has pushed prices to unprecedented highs. For instance, the cheapest vehicle in Iran’s market, SAIPA’s Pride, is changing hands for 500 million rials ($3,500). The same model was sold for 200 million rials ($1,400) a year earlier.
Other Proposals
Earlier in a report, Majlis Research Center outlined solutions for curbing prices in Iran’s chaotic auto market, which included the introduction of capital gains tax in the sector.
The report further proposed that each household should be charged an extra tax for purchasing more than one vehicle.
The introduction of a multi-tier taxing system for dealers has also been suggested by the center, based on which auto sellers should face increasing levies depending on the number of transactions.
In 2014, and during a housing crisis, the Iranian Parliament studied a bill on capital gains tax on property sales. The bill was later scrapped.
At the time, conservative MP Ahmad Tavakkoli censured the parliament’s decision to kill the bill blaming “powerful lobbies and vested interests” for the move.
Independent observers are of the opinion that even if a capital gains tax bill comes out of the labyrinthine process of the Iranian Parliament, powerful lobbies and vested interests will ensure that it does not see the light of day.
