The heads of three branches of government (executive, judiciary and legislature) approved a proposal by the Security and Exchange Organization (SEO) to slash tax on share trade by 80%.
The rare proposal was approved in line with government's ongoing efforts to lift the wilting stock market, apparently with little success.
It also comes after concerted efforts by the government to prevent capital outflow, including announcement of plans to revise price decrees, offering cars at the stock market and offering put options to guarantee profit and quality of stocks.
Back in October, the government economic taskforce headed by President Ebrahim Raisi approved new measures to help revive the bourse -- namely reducing tax on share trade and injecting another 110 trillion rials ($335 million) into the Capital Market Stability Fund (CMSF).
Tax on stock is paid on the purchase or sale of stocks, bonds, or other financial contracts like options and derivatives. Tax on stock trade currently is 0.5% of the total value of a deal.
It is different from capital gains tax that is commonly levied on share profit in most countries but not in Iran. The government has so far denied the likelihood of levying capital gains tax on share profit.
It decided to use tax revenue from share trade to invest back into the share market in the framework of its declared support measures.
Income from tax on share transactions is to be injected into the CMSF to help address the liquidity crunch, especially when selloff pressure is high and buyers are few and far beween.
The government generated 53 trillion rials ($196 million) in taxes last year – down 70% y/y according to data published by the Central Securities Depository of Iran.
The steep decline in tax revenue from the share market is linked to investor aversion following the historic collapse in the summer of 2020. The benchmark of Tehran Stock Exchange, TEDPIX, was up barely 4.5% during the year while the TSE’s equal-weighted index plunged more than 21%.
As per the 2022-23 budget, the government expects to make 104.2 trillion rials ($317m) in tax on share trade.
Stock traders paid 16.2 trillion rials ($49.3 million) tax in the first quarter (March 20-June 21) of the current fiscal year, up 74% on Q1 last year.
