Domestic Economy

Academic Expounds on Taxation Loopholes

The free-rider problem with public goods comes from the general belief that Iran is connected to oceans of oil revenues and the government can pay all costs of running the country from oil money
Academic Expounds on Taxation Loopholes Academic Expounds on Taxation Loopholes

Why does tax-to-GDP ratio in France or Denmark stand at 46% while it’s below 10% in Iran? How come the Swedes give half their incomes to the government but in Iran many leave no stone unturned to evade taxes? Have the westerners managed to build the culture of tax morale and tax compliance of their citizens but we’ve failed in doing so?  
In an interview with the Persian-language weekly, Tejarat-e Farda, Ali Marvi, professor of economics at Allameh Tabataba'i University, answers these questions and some more. Excerpts follow:
Reducing people’s economic reasoning to lack of culture does not allow us to analyze issues carefully. The fact of the matter is that people make many of their decisions by comparing economic costs and benefits, so unwillingness to pay taxes is not a behavior solely observed in Iran.
To ensure funding for public goods, including security, health and basic education, is one of the main reasons governments charge taxes. Some of these public goods, such as security, are non-excludable, which means it is available to all and cannot be withheld, even from people who do not contribute to its public funding. That characteristic, in turn, leads to what is called the free-rider problem with public goods. 


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