Domestic Economy

43% of Economy Not Taxed

43% of Economy Not Taxed
43% of Economy Not Taxed

About 43 percent of the economy is not being taxed, said Ali Tayebnia, minister of economic affairs and finance.

In a message to the 8th Conference on Tax and Fiscal Policies in Iran, held in Tehran on Wednesday, the minister wrote: “Under the present circumstances when over 43 percent of the economy is not being taxed, other factors like the low ratio of tax to GDP (gross domestic production), small share of tax revenues in government expenses, and low ratio of tax to general revenues would further minimize the effect of tax revenues on the economy.”

Almost every economist in Iran believes that currently tax revenues do not play a key role in the economy.

In his letter, Tayebnia insisted on the vitality of increasing tax revenues and the need for improving business environment. He said previous governments have overtly relied on oil revenues while tax revenues are the indisputable and enduring source of revenues for any government.  

Tax is directly related to GDP growth. The government can collect more tax if it pays more attention to domestic production by increasing production capacity and improving business environment, which would in turn leads to the rise of tax revenues, he explained.

Investment plays an important role in the process of economic growth. Expanding tax basics to earn tax revenues from unproductive economic activities and restricting tax exemptions can spur investment and production, he added.

The minister also said that the administration is working on a plan to reform the current taxation system with the aim of increasing the share of tax revenues in annual budgets.

On the sidelines of the conference, Ali Asgari, head of the National Tax Administration, told reporters that the parliament is expected to approve the tailored version of the tax bill in less than a month.

The bill for value added tax has already been prepared by the NTA and submitted to the government for approval, he added.

In next year’s budget bill proposed to the parliament on Dec. 7, tax revenues account for about half of the government’s total revenues, according to Asgari.