Minister of Economic Affairs and Finance Ehsan Khandouzi recently referred to the new approach of the Central Bank of Iran, based on which the presence of banks will decline in economic activities while they become more active in providing banking services to their clients.
This will reduce the income of banks, so to compensate for it, the government has allowed the banking network to increase service fees. An increase in the commission for making card-to-card money transfer has been proposed in this regard, Nasser Zakeri, an economist, stated in an article published by the Persian daily Shargh. A translation of the full text follows:
By reviewing the new decision, several questions arise, each of which is worth discussing independently. However, in this article, I will only deal with the issue of increasing service fees. Perhaps, from the point of view of many observers, the rise in the cost of money transfer as one of the thousands of ways of imposing price increases on citizens under the pretext of double-digit inflation will not be given importance and could be ignored in the flood of economic news, but according to the author’s belief, this seemingly small and less important measure points to a bitter and ponderable reality.
The Low-Income to Bear the Brunt
Any effort to increase the income of the banking network by increasing service fees imposes a small cost on the bank’s customers who happen to be the general public. But this imposition of cost is significantly to the detriment of the low- and middle-income classes.
In other words, by increasing the card-to-card money transfer fee, low-income groups will be covering the costs of maintaining and upgrading the infrastructure.
From the point of view of bank managers, the transfer of large funds does not impose much traffic on the existing network. But micro-funds, on an astronomical scale, are transferred through this network and such small transactions create a very large traffic load.
Based on this argument, they say that the money transfer fee, instead of being in proportion to the transferred amount, should be adjusted with the amount of imposed traffic. As a result, most of the income from the increase in money transfer fees will be received from small transactions, which mainly belong to the low-income groups.
Several Examples
The tenant population of the country is one of the low-income groups that will be severely punished by this approach of the banking network. This group, which deposits a monthly amount into the account of the owner of the residential unit, as a rule of thumb conducts more than 200,000 transactions daily. Banks allow themselves to charge more than 2 trillion rials (about $4 million) annually from the tenant population for transferring money to the landlord’s account. In fact, the tenant population of the country, who are presently suffering from the pain of being homeless and paying high rents, should bear the heavy cost of maintaining and expanding the infrastructure.
Another notable example is how parents pay pocket money to their children. Consider a family that deposits 10 million rials ($20) of pocket money into the account of their child every month, compared to a family that spends 1 million rials ($200) as pocket money for their child. Although the money that is being transferred is several hundred times more, the cost of the transfer will be four or five times at most, because, with the correct diagnosis of the managers of the banking network, wealthy households impose less traffic on the network!
Pay attention to the fact that in the past few decades and with the increase in the current government expenditure, authorities have always tried to balance the income and expense to some extent by reducing the responsibility of the government and avoiding the provision of some services to citizens. Ignoring the obligation to provide free public education is just one example of such cases.
Now, imagine a situation in which the road authorities, at their own discretion, decide to collect the cost of building a bridge from passers-by through tickets. In this way, the low-income groups, due to imposing more traffic on the bridge, should have a greater share in financing the bridge construction.
Per Capita Tax Collection System
The generalization of such an attitude, which is rooted in our society for years and no longer surprises anyone, will eventually lead to the fact that the rule of collecting tax, based on the ability to pay, will be abandoned and a type of per capita tax collection system will replace it!
In other societies, the share of citizens in providing the country’s construction costs is determined based on the ability to pay, and those with high incomes pay higher taxes with the justification that they benefit the most from the state welfare. In our country, the prosperous households due to having lower traffic in the communication network of the banking and road networks, will be exempt from paying tax!
The author’s compassionate recommendation to those in charge is to correct this deviation (basically a deviation of view) as soon as possible and abandon the anti-poor approach.
As the first step, they can calculate and receive the price of money transfer services not according to the volume of traffic imposed, but based on the convenience extended to customers.
