A senior official believes that the government has overestimated its next year’s revenues from reducing tax breaks, curbing tax evasion and levying wealth tax.
Ebrahim Bahadorani, the top advisor to the president of Tehran Chamber of Commerce Industries, Mines and Agriculture, also supported thecc parliamentarians’ opposition to the amended version of the next year’s [March 2020-21] budget bill.
“But if that’s just a politically-motivated vote, the private sector won’t see any benefit either,” he said.
Last Monday, the Iranian Parliament, also known as Majlis, rejected the outlines of the upcoming fiscal year's (starting March 20) budget bill and returned it to the Majlis Joint Commission for revision—a parliamentary body responsible for reviewing the budget bill as well as five-year development plans proposed by the government before it is put to a parliamentary vote.
Members of parliament cast 67 votes for and 114 votes against, as three abstained from voting, IRNA reported.
Bahadorani said the projected income from 1 million barrels per day of oil export is equally unreal as it is the tax revenues of close to 1,950 trillion rials ($13 billion).
“The government should have introduced measures to improve the business environment in the current year in order to see an improvement in tax revenues next year. It has predicted to gain a total of 490 trillion rials ($3.28 billion) from sales of its assets, which is highly unlikely to materialize. Setting such budgetary objectives is like sweeping the budget deficit problem under the carpet,” Bahadorani said.
“The government had predicted earning 1,750 trillion rials [$11.74 billion] in tax revenues this year. The number has yet to be realized. However, the next year’s bill includes about 1,950 trillion rials in tax money, which is very tough to realize under the US tightening sanctions and the Financial Action Task Force measures against the country.”
The advisor noted that the government has said it will increase its tax revenues by reducing tax breaks, preventing tax evasion and imposing wealth tax, but we know well that the so-called fight against tax evasion is an old slogan repeated every year, which the government fails to achieve despite much efforts.
“Wealth tax, in its first year of existence, can’t possibly raise revenue commensurate with what the government hopes. Above all, the revocation of tax exemptions is no easy task,” he told the news outlet of TCCIM,” he said.
In early January, Majlis Joint Commission approved wealth tax on homes with a value of more than 100 billion rials ($671,140) and cars worth more than 10 billion rials ($67,114). In the bill proposed by the Economy Ministry, homes valued at more than 50 billion rials ($335,570) and cars worth more than 5 billion rials ($33,557) are to be taxed.
Referring to Iran’s poor ranking of 127 in the World Bank’s Ease of Doing Business Report 2020 despite being the 29th biggest economy of the world, Bahadorani said, “Policymakers need to charge higher taxes only when they’ve managed to provide a better environment for businesses to earn more income. The government should pave the way for new investments through reforming taxing policies. That would be to the benefit of both people and the government.
“At present, the government collects a 9% value added tax from companies’ sales. This is while investors don’t make such a profit, except for those in special industries. On top of that, one-fourth of companies’ net profit is paid in taxes. The government is in fact people’s partner; it will sustain losses in an unfavorable business environment,” he said.
“I wonder why it doesn’t take any step to improve doing business? All in all, you can’t expect to have more tax revenues when the investment rate is negative.”
Iran’s ease of doing business score has seen a decline of 0.1 percentage point, though its ranking among 190 economies in the WB’s Ease of Doing Business Report 2020 improved by one place to 127th.
The country’s overall distance to frontier score is 58.5, compared to last year’s 58.6. An economy’s distance to frontier is indicated on a scale from 0 to 100, where 0 represents the lowest performance and 100 the frontier.
