Tax Revenues Up 25%

The Central Bank of Iran's figures show the government’s tax revenues increased by 25% in the first five months of the current Iranian year (started March 20) compared with last year's corresponding period to stand at 356 trillion rials ($9.9 billion at market exchange rates).

Revenues from direct tax, including taxes on legal entities, income and wealth, stood at 198 trillion rials ($5.5 billion), and indirect taxes like import duties, tax on goods and services and value added tax, accounted for 158 trillion rials ($4.4 billion) of the figure.

Tax revenues from sales of oil products stood at 26,300 billion ($732.99 million). For cigarettes, the sum stood at 1,500 billion ($41.8 million). Revenues from VAT amounted to 83,000 billion ($2.31 billion), IRNA reported.

According to Iran National Tax Administration’s head of Direct Taxation Department, taxation will meet 44% of the government’s expenses this year.

“We predict tax revenues to reach 870 trillion rials ($22.45 billion) this year, 60% of which will be raised through direct taxation,” Nader Jannati also told IRNA last month.

Jannati said small business owners and professionals will only cover 6% of the 500 trillion rials that will be raised through direct taxation.

“Most of the revenues will be collected from companies and wealthy individuals,” he said.

About 12% of the revenues will come from taxing public and private sector employees, double the amount raised from business owners.

INTA chief, Kamel Taqavinejad, says the tax administration is establishing a special office to tackle tax evasion.

The formation of the High Office for Combating Tax Evasion will help the government increase its low tax receipts.

Government tax revenues accounted for hardly 6.3% of gross domestic product in the current fiscal year. That is lower than what Iran’s war-ravaged and poverty-stricken neighbor, Afghanistan, can muster.

The average that member states of the Organization for Economic Cooperation and Development—a club of developed economies—collect is 34.8% of GDP.

Low oil prices, deep recession and a legacy of atrocious public finances have forced the government’s hand. Now it is making every effort to overhaul the tax regime to increase revenues.

INTA has a lot of ground to cover, owing 493 trillion rials in tax from prior years.

Taqavinejad plans to collect 45 trillion rials ($1.27 billion) of it before the end of the fiscal year.

However, the real battle is about curbing tax evasion and fraud, considered to be widely prevalent in Iran.

Taqavinejad estimates that between 130 and 300 trillion rials ($3.67 billion-8.46 billion) worth of taxes are being evaded.

The main missing factor for the tax administration is data. INTA says it has come up with new databases and data-matching software to catch tax evaders, as electronics will make falsifying records, hiding assets and other swindling ploys harder to pull off.

“The focus is now on expanding the tax base and targeting entities currently exempt rather than raising taxes for those already paying,” the government spokesman, Mohammad Baqer Nobakht, said earlier this year.

According to Economy Minister Ali Tayyebnia, the government’s newly-drafted direct taxation code overhauls tax exemptions, adds new taxpayers and is geared toward boosting manufacturing.