Tax Revenues Grow by 45% to $1.8 Billion in Two Months

The Iranian National Tax Administration earned 886 trillion rials ($1.8 billion at the current exchange rate) in the first two months of the current fiscal year (started March 21), which indicate a 45% rise compared to tax revenues gained during the corresponding period of last year, says the new INTA chief. “Of the total sum, direct taxes accounted for 460 trillion rials [$963 million] and tax on goods and services, including the weighty value added tax, accounted for over 420 trillion rials [$880 million], which show a respective rise of 53% and 47% year-on-year,” Mohammad-Hadi Sobhanian was also quoted as saying by IRNA. He added that tax income reached 450 trillion rials ($942 million) in the second month of the year to register a 40% year-on-year rise, of which over 270 trillion ($565 million) constituted direct taxes and about 180 trillion ($377 million) were tax on goods and services, up by 60% and 40% respectively. INTA earned 4,700 trillion rials (over $9.84 billion) in tax income in the fiscal 2022-23, according to the head of INTA’s Planning and Statistics Group. “The earnings account for 103% of the figure estimated in the budget, which have increased by 54% compared to the preceding year,” Mojtaba Amiri was also quoted as saying by IRNA. “Of the total income, 2,930 trillion rials [$6.13 billion] are related to direct taxes, accounting for 70% of the figure estimated in the annual budget, which indicate a 36% rise compared to the year before,” he said. “The three sub-categories of direct taxes, namely tax on legal entities, income tax and capital tax stood at 1,890 trillion rials [$3.96 billion], 849 trillion rials [$1.77 billion] and 190 trillion rials [$398.09 million] respectively.” Amiri said 1,760 trillion rials [$3.68 billion] pertain to tax on goods and services, accounting for 84% of the budget, marking a 51% rise compared to the year before. *** How Tax Income Is Raised Davoud Manzour, the former head of INTA who now serves as the head of the Plan and Budget Organization, said new taxpayers identified by the administration and the resources gained by stemming tax evasion make up the 60% rise in the government’s tax income. On the remaining 40%, he said part of the increase in tax income is derived from rising commodity prices, of which the 9% value added tax is an important part. “Another portion of the rise in tax income has accrued from the manufacturing units’ exit from recession, which further generates value added,” he added. Manzour noted that INTA’s estimates show about 350,000 companies and three million individuals had failed to submit their tax declarations last year. Stressing that the government pursues a policy of trusting taxpayers’ declarations, he said only 5-10% of all declarations will be reviewed by the tax administration. Allaying concerns about a possible increase in taxes on businesses and salespeople, Mehdi Movahedi, the head of Fiscal Planning Center of INTA, said there will be no new tax bases or rise in tax rates. “A significant part of the rise [in tax income] owes to high inflation, which is expected to stick above 40%,” he was quoted as saying by IRIB News. Stressing that tax rates will remain the same as last year’s, he said efforts have been made to minimize pressure on the production and real economic sectors. “Tax income has a 50% share in funding the government’s expenditure. We plan to maintain this share in the current fiscal year [March 2023-24],” he added. Echoing Manzour’s comments, he explained that INTA is looking to raise its income by collecting tax arrears, as well as stemming tax evasions. The Ministry of Economic Affairs and Finance announced earlier in 2022 new measures taken by the government, including connecting nine million point-of-sale (POS) terminals to the national taxation system and activating another nine million POS terminals. “As a result, the number of taxpayers increased by three million by August 22 … The number of tax declarations submitted to the Iranian National Tax Administration increased from 3 million to 4.5 million [more than a 50% rise] by July 22,” he said. The Comprehensive Taxpayers System, which is the main platform for the implementation of the law of shopping terminals, requires all sales and purchases to be registered in the form of electronic invoices. The government aims to increase the share of taxes and reduce the share of oil revenues in the public budget as the income from the sale of natural resources, including oil, gas and mines, is supposed to be spent on development projects instead of being used for budget expenditures. *** New Tax Bases INTA announced recently that all takeaway restaurants and coffee shops will be subjected to VAT as of June 22. Capital Gains Tax, which had been the topic of many discussions for a long time, was finally approved by the parliament. CGT is a component of income tax, levied on the income from the transfer of movable or immovable capital assets, tangible or intangible. The purpose of this type of tax is to regulate the activities of economic sectors, limit speculative practices, increase government revenues, create social justice and reduce income gap. Some radical supporters of this type of tax, even talk of its effect on bringing down inflation, stabilizing the foreign currency market, increasing investment in the real sector of the economy and boosting economic growth and development. What’s more, the Budget Law stipulates that social media influencers with more than 500,000 followers who generate income from commercial activities will be subject to income tax. Economy Minister Ehasan Khandouzi earlier communicated the directive on taxing influencers to the Iranian National Tax Administration. And 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 has been asked to log on to Intamedia.ir and report tax schemes and evasions, and receive a special reward. INTA is expecting to add 900 trillion rials ($1.88 billion) to its income in the new fiscal year (March 2023-24) by stemming tax evasion, Manzour was quoted as saying by IRIB News earlier. “We expect our tax income to account for 65% of government revenues,” he added.