With the decline in number of deals and noticeable investor reluctance, income tax from share trade declined sharply in the first quarter of current fiscal year (March 21-June 21).
Also known as financial transaction tax, tax from stock deals stood at 9.312 trillion rials ($38 million) in the three months, barely a third of the amount in the corresponding period last year.
According to data published by the Central Securities Depository of Iran, tax on stock trade declined by more than 73% from over 35 trillion rials ($145m) in Q1 last year.
Tax on stock is levied on buying and selling a stock, bond, or other financial contract like options and derivatives. The steep decline in tax revenue could be explained by the huge downturn in the stock market and low liquidity of stocks.
A look at CSDI data, however, indicates that the tax on deals almost doubled in the month to June 21 (2.4 trillion rials) compared to the first month (4.3 trillion rials).
Tax on stock trade was rather significant for the government last year (March 2020-21). It generated 179.89 trillion ($745m) – impressive given the deep downturn in the second half of the year.
Government tax income increased by 445%, accounting for more than 9% of the total tax income last year.
Tax on stock deals is 0.5% of the total value of the trade. The government has forecast higher tax income from share trade in the current fiscal year. As per the provisions of the fiscal budget, it expects to collect 141.6 trillion rials ($590m) from share trade alone.
The government plans to use a big portion of its earnings from tax on share deals to bolster the stock market, which has taken a drubbing due to the non-step sell-off and capital outflow in the past 10 months.
The move is part of a support package approved earlier in the month by the Supreme Council of Economic Coordination, the top economic decision making body comprising heads of three branches of power.
Accordingly, 80% of government revenue from tax on stock trade will be deposited with the Capital Market Stabilization Fund designed to help resolve the credit crunch in the bourse.
