Tax revenues have risen by 45% in the first five months of the current fiscal year (started March 21) compared with the same period of last year, according to the director of Iranian National Tax Administration.
Omid Ali Parsa also announced that tax revenues during the period reached 530 trillion rials ($4.64 billion), which show that 89% of the target set by the budget have been met in the five months, Tasnim News Agency reported.
“The growth in tax revenues is partly because of recovering overdue payments and putting in a great deal of efforts to fight tax evasion by tracking down bank transactions,” he said.
The government earned 1,090 trillion rials ($9.56 billion) in tax revenues during the last fiscal year that ended on March 20, 2019.
The earnings had been estimated to stand at 1,130 trillion rials ($9.91 billion) as per the fiscal 2018-19 budget law, suggesting that 97% of the target were arrived at.
Direct tax revenues, including “tax on legal entities”, “income tax” and “wealth tax” stood at 640 trillion rials ($5.61 billion), registering an increase of 15% compared with the year before.
Earnings from tax on goods and services hit 450 trillion rials ($3.94 billion), indicating an 11% year-on-year growth.
A total of 1,400 trillion rials ($12.28 billion) have been projected in tax revenues this year (March 2019-20).
According to the INTA chief, tax evasion in Iran stands at 300-350 trillion rials ($2.63-3.07 billion).
The Ministry of Economic Affairs and Finance estimates that tax evasion and avoidance in Iran stand at 35% of total tax revenues.
Value added tax accounts for the lion’s share of total tax revenues in Iran at 23.5%, as per INTA figures, followed by corporate tax and import tax. This is while income tax makes up the biggest share of tax revenues in high-income countries. Corporate (company) tax is the second top earner of such revenues in Iran.
The tax-to-GDP ratio rose from 5% in 2013-14 to 6% in 2018-19, indicating a 20% growth, according to the Plan and Budget Organization.
Hassan Rouhani first took office as Iran's president in the fiscal 2013-14 and was reelected for a second four-year term in the fiscal 2017-18.
The PBO report shows the share of tax revenues from general budget resources increased from 33% in the fiscal 2013-14 to 36% in 2018-19, indicating a 9.1% growth.
PBO noted that the increase in tax revenues has come in line with a decrease in the share of oil in the government budget.
The share of tax revenues from government spending grew 7.8% from 42% in the year Rouhani took office to 45.3% last year (March 2018-19).
Modernization of Taxation System
INTA is moving to modernize Iran's taxation system based on verifiable information about the status of taxpayers, according to Parsa.
"How can we provide for social expenses, including keeping order and security, education, healthcare and the myriad infrastructural projects across the country?" he was quoted as saying recently by IRNA.
"There are basically two ways for this: levying taxes proportionate to incomes and consumption, which is in line with social justice, or printing money, which results in inflation and a type of tax whose pressure is felt by low and middles classes, the retired and less fortunate citizens."
Parsa stressed that the need to reform and modernize Iran's taxation system is now more urgent than ever as US unilateral sanctions have targeted export revenues.
A total of 1,400 trillion rials ($12.28 billion) have been projected in tax revenues in the current fiscal year (March 2019-20)
Echoing a similar line, Economy Minister Farhad Dejpasand says the current circumstances under economic sanctions offer a blessing in disguise for Iran to improve its taxation system.
"In advanced countries, 25% of people’s total income go toward taxes. This rate stands at 8.5% in Iran," Parsa said, adding that should Iran seek to follow the example of developed countries in terms of a just taxation system, INTA needs to have all-out access to financial turnovers, property deals and assets.
Expanding the tax base, fighting tax evasion and improving transparency in taxation process are missions set for the chief taxman by President Hassan Rouhani.
INTA to Enforce Green Tax
Tax will be levied on products that cause environmental damage in their manufacture or use, Mohammad Masihi, an official with the Iranian National Tax Administration said recently.
As per the budget law of the current fiscal year (March 2019-20), he explained, a 2% tax will be imposed on domestically manufactured paint, coating, primer, tires, tubes, plastic and electronic toys, containers made of plastic, polyethylene terephthalate and melamine.
Imports of the above-mentioned products will be subject to a 3% tax.
“Locally-produced light bulbs, except SMD/LED, will be subject to a 3% tax, while a 4% tax will be charged for their imported counterparts," he said.
“A 3% tax will be imposed on domestically manufactured computers, audiovisual equipment and cellphones as well as linoleum, cellophane and nylon. Importers of these products will be required to pay a 4% tax."
Environmental tax, also known as green tax, pollution tax or eco-tax, refers to a wide range of legislative charges on businesses and private individuals, aimed at reducing practices that cause damage to the environment. There are many forms of environmental tax, some of which are aimed at penalizing those who emit harmful chemicals and some of which are aimed at rewarding those who employ environmentally-friendly practices.
Green taxes give legislators and policymakers a powerful instrument for environmental protection, which supplements existing regulatory strategies. While regulatory mechanisms are used by government to lessen environmental damage by restricting or banning certain products and activities, green taxes seek to achieve the same goals through economic incentives. The popularity of this approach to environmental problems has led many European nations to enact green taxes in recent tax reforms.
For Iran, though, besides the environmental issue, the move could come in handy, as the government is looking to wean off petrodollars at a time of "toughest ever" US sanctions against Iran's oil sales.
In fact, ever since the reintroduction of sanctions, increasing tax revenues has been brought up as a key measure to boost Iranian finances.
