Domestic Economy

Outlines of 2015-16 Budget Approved With Focus on Increasing Tax Revenues

Outlines of 2015-16 Budget Approved With Focus on Increasing Tax Revenues
Outlines of 2015-16 Budget Approved With Focus on Increasing Tax Revenues

The outlines of the budget bill proposed by the government for the next Iranian fiscal year was approved by the parliament’s joint committee in charge of monitoring and reviewing the draft budget bill on Sunday, informed the committee's spokesperson, Mohammad Mehdi Mofateh.

Meanwhile, the government's spokesperson, Mohammad Bagher Nobakht announced on Sunday that the proposed budget for the next Iranian calendar year (starting March 21) relies mostly on "tax revenues and sales of government bonds to replace the reduced oil revenues."

“The government revenues in the next year's budget depend largely on increasing tax revenues. The government has envisioned increasing its tax revenues by 19% from 1000 trillion rials ($37 billion at the current official exchange rates) in the current year's budget to 1,190 trillion rials ($44 billion) in the coming year,” he was quoted by IRNA as saying.  

Since it assumed office in August 2013, the Rouhani administration has promised to figure out sources of revenues to replace the traditional oil revenues amid recent sharp declines in the global oil prices.

“Less than a third of the next year's budget is based on oil revenues, a record low in the past ten years,” Nobakht added, noting that the oil revenues, which still account for a large portion of the government revenues, have been reduced by 8% compared with the current budget.

The government is anticipating toearn up to 710 trillion rials ($26.9 billion) from oil sales in the international markets in the upcoming year.

Officials have on several occasions pointed out that the government will turn its focus on tax revenues to compensate a possible budget deficit arising from lower oil revenues.

While economists are concerned about possible a hike in tax rates and the ensuing public sentiment, Nobakht clarified on the issue by saying: “Increasing the tax revenues will not translate into increasing the tax rates. As was the case in the previous months, 98% of the tax revenues were materialized through identifying new tax bases.”

Tax base refers to the assessed value of a set of assets, investments or income streams that is subject to taxation, or the assessed value of a single asset that is subject to taxation.

"Only 0.7% of the next year's budget is based on the sales of participatory bonds,” Nobakht further underlined, noting that the figure does not show significant change compared with the current year.

>> Higher Tax From Gov't Entities

The joint committee's spokesperson, Mohammad Mehdi Mofateh said that the committee has increased the amount of tax revenues to be generated from government and non-government entities in the coming year.

"Tax revenues from government entities have increased from 82,300 billion rials ($3 billion), envisaged by the government in its draft bill, to 90,320 billion rials ($3.3 billion) in next year's budget, while taxes from non-government entities has risen from 195,830 trillion rials ($7.25 billion) to 208,220 trillion rials ($7.7 billion)," he said.

He also noted that in order to prevent tax evasion and increase the taxat system's efficiency, government authorities should be allowed access to the tax payers’ account information – a move he described as "a common and necessary practice all over the world."

The budget bill for the Iranian calendar year ends on March 20 was handed over to the parliament on December 7, 2014. The joint committee, comprised of representatives from the budget and planning committee, is responsible to review the draft budget bill before final ratification.

The proposed budget, which includes the budgets of both state-run enterprises and the government, amounts to 8,370 trillion rials ($310 billion at current official exchange rates), up from the current year's budget of 8,030 trillion rials ($297 billion).

Out of the total value, the government budget amounts to 2,670 trillion rials ($98.8 billion). The president announced last week that the government's budget amounted to 2,196 trillion rials ($81.3 billion) but noted that it could change slightly before being submitted to the parliament.

Salaries of government employees are set to increase by 14 percent in the coming year, down from the 20 percent salary hike in its preceding budget.

Government is expecting to save as much as 480 trillion rials ($17.7 billion) through the implementation of the Subsidy Reform Plan. Out of this, 15 trillion rials ($555 million) will be allocated to the housing sector and 10 trillion rials ($370 million) to the job market.

Under the proposed budget bill, some 730 trillion rials ($27 billion) of the government's capital assets, including oil and infrastructures, will be handed over to the private sector.

Financial assets worth 310 trillion rials ($11.5 billion) including participatory bonds, treasury documents and Sokuk (financial certificates like bonds which comply with Sharia or the Islamic law) are also to be sold to the private sector. Sokuk are being included as a separate section in the budget for the first time.

The government has predicted earnings amounting to 10 trillion rials ($370 million) from selling its capital assets and 15 trillion rials ($555 million) from selling movable and immovable assets.

The budget also allocates some 480 trillion rials ($17.7 billion) to national and provincial projects, which is 16 percent higher than the 410 trillion rials ($15.8 billion) allocated for this purpose in the current year's budget.