Economy, Business And Markets

Call for Taxing Deposits Held by Uncertified Credit Firms

Call for Taxing Deposits Held by Uncertified Credit Firms Call for Taxing Deposits Held by Uncertified Credit Firms

An amended tax law has made it mandatory for uncertified credit institutions to levy taxes on their deposits.

Hossein Vakili, deputy for direct taxes at the Iranian National Tax Administration, said on Saturday if the administration could access information on deposits in the uncertified companies, it would impose taxes on deposits dating to five years ago.  

“According to the new law, deposits in unauthorized credit institutions no longer enjoy tax exemption,” Vakili was quoted as saying by ISNA.

“Commercial banks and authorized credit institutions will continue to benefit from tax exemption on deposits. The taxes will be levied in accordance with the deposit rates in those institutions.”

The ruling would be another blow to uncertified financial institutions, which are already facing unprecedented heat from regulatory bodies.

Unruly institutions, whose numbers exceed 6,000, have been luring a large number of customers by offering exorbitant interest rates.

 Hamid Tehranfar, vice governor of the Central Bank of Iran, recently promised to put an end to the saga of unauthorized credit and financial institutions by the end of the Iranian Year (March 19, 2016).    

“All uncertified institutions are required to release data about their deposits and if they refrain from doing so, they will be charged with a criminal act,” Vakili warned.  However, he said even if these companies withhold data about their deposits, the administration has enough tools to extract them.

He continued: “Although the existing law requires uncertified companies to pay taxes on their deposits, they have so far refused to do so. But this time around it has been decided that if they continue to do so, the companies will have to pay the taxes themselves.”

Vakili reiterated that whenever information about the deposits became available, deposits as old as five years would be subject to direct taxes.  

The growth of unlicensed credit and financial institutions picked up steam during the two-term presidency of Mahmoud Ahmadinejad and has since become a major challenge for President Hassan Rouhani’s administration.  

As the pressure mounts on unauthorized credit and financial institutions, these companies have not changed course in any conspicuous way and in some cases have stepped up their Russian roulette with the country’s financial system.

Although Tehranfar warned in the past that any illegal financial company in the process of obtaining license should behave or else expect obstacles to their permission-seeking process, many of the institutions have turned a deaf ear to the warning.

As reported by ISNA , many of these companies are still offering extortionate deposit rates–sometimes as high as 30%–and continue to attract new customers; something which defies the direct ruling of CBI .

The burning question is whether companies, which have yet to receive their license and are already thumbing their noses at CBI regulations, can ultimately be trusted with a certificate.