One year past the Iranian government’s so-called “economic surgery” [abolition of subsidized imports], with an inflation hovering around 50%, the Iranian government and parliament are mulling over plans to heal the painful economic wounds.
Among these plans are the “Capital Gains Tax”, “requiring the official registration of real-estate deals” and “discrediting the ordinary and power of attorney documents”. A majority of the people are against these less thought-out plans, Hossein Haqgou, an economic expert, prefaced his write-up for the Persian daily Ta’adol with this note. A translation of the text follows:
As said in the letter of economy minister [Ehsan Khandouzi] to the Guardians Council, according to Article 17 of the Resistance Economy policies regarding “reforming the government’s revenue system by increasing tax revenues”, the CGT law is being enforced in 143 countries.
The minister defends the fairness of these plans, saying that they only target 2% of the people. Echoing the same remarks, the head of Majlis Economic Commission says tax on capital gains will not affect 99% of Iranians.
Speculative practices, tax evasions and lack of registration of transactions at official notaries are the outcome of inflationary environment. Iran is among the top six countries in terms of high inflation.
If the minister is sincere about the implementation of CGT law in 143 countries, why doesn’t he speak of single-digit inflation in 130 countries and inflation below 20% in 40 countries, and inflation between 20-40% in 10 countries as the World Bank reported?
In his letters, the minister has promised to end speculative practices and help stimulate production once these proposals become law.
According to Khandouzi, the approval and implementation of the tax on speculation will boost motivation for investment and production, in addition to reducing speculative activities in markets such as real-estate, car, gold, currency and cryptocurrency.
Such a prediction is unlikely to come true. The implementation of such plans in the highly inflationary environment of our country will increase the chances of corruption via bypassing the law and increasing the price of items included in the plan, increasing the costs of transaction and reducing investment in sectors such as housing.
The super challenge of “inflation” is the main problem of our economy. People resort to high-risk markets such as currency, gold, cryptocurrency to protect the value of their assets from the 50% inflation; banks’ interest rate only covers half of this loss.
Seriously, until when are the officials going to opt for the wrong option? The current crippling inflation is destroying the economy, morals and all social relationships; it won’t be cured, except by employing structural reforms; reforms that include safeguarding individual and social rights and freedoms. Among the most important of these rights are property rights and freedom of exchange to stabilize macroeconomic components (exchange rate, banking interest, tariffs, etc.), proper interaction with the world and efficient social security.
Without these structural reforms and the treatment of high inflation, likes of CGT are doomed to fail; they will fail to curb speculative practices, production won’t increase and people will be deprived of these remaining options to protect the value of their assets and will ultimately become professional smugglers.
