Economy, Business And Markets

No Taxes on Bank Deposits

No Taxes on Bank DepositsNo Taxes on Bank Deposits

As the debate on the revised tax laws requiring banks to disclose their account information to tax officials continues, officials are sparing no effort to assure the public that the media hype on the issue is not at all valid.

"In all parts of the world, a database exists to verify the tax return submitted by citizens where various information, including monetary, financial, real-estate, etc., is recorded," said Mohammad Qasem Panahi, vice president of the National Tax Administration.

Panahi told IRNA that account information is a component of the database and is solely used to ascertain the tax assessment data submitted by individuals and companies. "Taxpayers can rest assured that no taxes will be levied on their bank deposits," he emphasized.  

In a decree issued on Aug. 22, President Hassan Rouhani ordered financial institutions to send annual turnover and account balance of all institutions and individuals to tax authorities.

The law also requires all governmental, municipal, non-governmental, public and financial institutions, the State Organization for Deeds and Properties along with private institutions “that have the database’s needed data or in any way assist individuals in obtaining income or assets,” to provide the tax administration with information.

The unsettling news caused concerns among taxpayers who worried that their personal information would be compromised and some experts weighed in by saying that the initiative would trigger capital flight but the Central Bank of Iran denied those allegations, saying the directive had been misunderstood.

"All tax information would remain confidential and if any tax agent uses account information for any purpose other than taxation, they would face suspension from work and even jail terms," Panahi stated.

Modus Operandi

As to how the tax office would collect the account information of citizens, no straightforward answer has been given yet. Will the tax information receive its data from the CBI or would it contact individual banks?

"The law states that all banks should provide the tax office with their account information, but we are not after a bank-to-bank inquiry. It depends on our agreement with the CBI," Panahi said.

He stressed that all credit and financial institutions—whether certified or uncertified—are subject to the tax ruling.

 "We have sufficient oversight on the institutions financial transactions and if they refuse to provide us with the data, we will take action ourselves," he noted.

Hunting for Crooks

Hossein Vakili, deputy for direct taxes at the NTA, also made an announcement last week that uncertified financial institutions do not enjoy tax exemption and would have to pay taxes on deposits dating as far as five years back.

Ali Asghar Mirmohammad Sadeqi, Head of the Communications Office at CBI,states that the new tax laws are intended to promote "economic transparency."

"Some individuals, when applying for loans present themselves as prosperous but when it comes to paying taxes they pretend to be penurious," Sadeqi complained.

"We have a database at the central bank from which banks solicit information before offering loans to their applicants and we intend to employ the same database for the purpose of tax information.

Contrary to Panahi's remarks on unauthorized institutions, Sadeqi said the CBI has no accurate information about deposits in unauthorized institutions.

"However, CBI will relentlessly keep up its campaign against uncertified credit and financial companies until they are organized," Sadeqi reaffirmed.

The official said tax reforms would also help the CBI in its fight against money-laundering and reiterated CBI's commitment to protecting the secrecy of citizen's bank accounts.

Almost half of the Iranian economy reportedly commits tax evasion, including many state-affiliated organizations, which either do not provide their books or manipulate financial records. Proponents of the order point to its role in precluding tax evasion as its biggest strong point.

Also last month, Minister of Economy Ali Tayyebnia called for simplification of the tax collection process. In a letter to Ali Asgari, head of the NTA, he emphasized the important role of a comprehensive tax system in improving efficiency and transparency in tax-related activities.  

Tayyebnia called for the development of online services and creation of a tax database, urging the tax administration to actively participate in the improvement of tax laws.