Taxation Gearing Toward  High-Income Enterprises

The taxation system is shifting its focus on high-income enterprises, says the head of Iranian National Tax Administration.
“We have received four million tax declarations from enterprises this year, 1.2 million more than in the last year,” Davoud Manzour was also quoted as saying by Fars News Agency. 
Nothing that tax on manufacturing enterprises has reduced by 5% to 20% this year, the INTA chief said tax forgiveness is on INTA’s agenda for certain businesses.
“The overall tax income is projected to see a 2.5-fold increase this year. However, of the 4 million taxpayers [who submitted income declarations], 1.6 million have been entitled to zero taxation and 800,000 others are to pay less than 5 million tomans in tax [about $156],” he said.
“Instead, 5% of high-income taxpayers, including medical doctors and lawyers, will account for 50% of tax income.”
INTA earned 55% more in the first two months of the current fiscal year (March 21-May 21) compared with last year’s corresponding period, which amounted to 610 trillion rials ($1.9 billion) in taxation during the period.
According to Manzour, the income does not include customs duties.
INTA earned 51.42 trillion rials ($160 million) from income tax on public and private workers during the same period, ISNA reported.
As per the fiscal 2022-23 budget of the government, annual income tax exemption ceiling has been set at 672 million rials ($2,100).
The income from public workers during the two-month period stood at 19.68 trillion rials ($61.5 million) while that of private employees were at 31.73 trillion rials ($99 million). 

Corporate Income Tax

INTA had earlier announced that 1.1 million small- and medium-sized enterprises have been exempt from taxes.
“Tax on 80% of SMEs will not be more than 50 million rials [$156] and that of 400,000 taxpayers will be between 50 and 200 million rials [$625]. The tax on 100,000 businesses will be more than 200 million rials each,” the head of INTA was quoted as saying by IRNA. 
INTA has required businesses whose sales exceeded 48 billion rials [$150,000] in 2021-22 to declare their earnings for taxation.
The tax on enterprises will be calculated based on sales deposited into their point-of-sale systems, says the head of Auditing Department of the Iranian National Tax Administration. 
“The profits businesses make is taxed by INTA; the higher the taxpayers’ profits, the more their taxes. According to Article 101 of the Law on Direct Taxes for Business Owners, up to 360 million rials [$1,125] in [annual] profit will be exempt from tax in the fiscal 2021-22,” Shahin Mostofi was also quoted as saying by Otaghiranonline.ir.
“The sum of 360 million rials will be deducted from the profits made during the year and the rest will be taxed. Up to 500 million rials [$1,562] of profit are subject to a 15% tax; a profit of between 500 million rials and 1,000 million rials [$3,125] is subject to a 20% tax and 25% tax will be levied on profits exceeding 1,000 million rials.”
The latest proposal by the Ministry of Economic Affairs and Finance on taxing bank transactions provoked the ire of economic players and business owners. A large swath of shopowners in Tehran, Arak and other cities shuttered to protest the new measure. They wanted government officials to realize that sanctions and inflation have tightened the screws on them and that the new tax would be synonymous with the end of their businesses.
“Before coming to office, the new administration and president-elect Ebrahim Raisi used to claim that they would not tie people’s livelihoods with sanctions. But in actuality, the economy and people’s livelihoods were tied to sanctions; ill-judged economic policies have cemented this tie more than ever. In economy, talks and promises are not consequential; rather it is decisions, strategies and approaches that are pivotal. Some officials presume that they will be able to reduce the pressure on people if they say ‘fair distribution of subsidies’ instead of ‘deregulation’ or say ‘we won’t tie livelihoods of people to sanctions’ instead of ‘increasing taxes’. It is strange that they have yet to understand that the country’s economy is dependent on oil exports; any move that lead to the decline in oil revenues would negatively impact people’s livelihoods,” Morteza Afqah, an economist and university professor, said in a write-up for the Persian-language daily Etemad.
Noting that the government is exerting maximum pressure on people to make up for the decline in oil revenues, he said, “The economy is not stable; the local currency is losing its value by the day. The economic instability is ruffling the feathers of producers, business owners and consumers. Under the circumstances, the government is girding its loins in preparation for another move to increase its revenues through taxation. It is not clear who gives counsel to the government; any expert with the rudimentary knowledge of economics knows that under sanctions and inflationary conditions, the imposition of tax will spell the end of production and business.” 
Afqah noted that when imports account for a significant portion of raw materials and oil revenues are not enough to purchase intermediate and capital goods, production will drop and when production declines, the overall revenues of supply chain will decrease. 
“It is gullible to think that you can replace oil revenues with tax income under such circumstances. Putting extra pressure on employees and business owners is detrimental to the production sector and will cause serious problems in the future. More protests will be held by businesses unless policymakers decide to wake up and smell the coffee,” he said.

Capital Gains Tax

Trade of capital goods with the purpose of profiting from the increase in prices and gaining income will be subject to taxation, Manzour said. 
“Once the capital gains tax becomes the law of the land, four commodities, namely housing, gold, foreign currency and automobiles, will be subject to tax. To implement this law, we need to have the infrastructure to calculate profits from the sale or transfer of goods,” he was quoted as saying by Mehr News Agency.
The Majlis Economic Commission has completed its research on capital gains tax. Hopefully, the bill will be reviewed soon in the open session of the parliament, he added.
As per the new approach employed by INTA, whistleblowing on tax evaders and other tax violations will be incentivized. The whistleblowing guidelines were communicated to tax offices on Feb. 27. 
The public can log on to Intamedia.ir and report tax schemes and evasions, and receive a special reward.