Economy, Business And Markets

Intel Ministry Counters Black Market

Intel Ministry Counters Black MarketIntel Ministry Counters Black Market

The Intelligence Ministry is increasing efforts to fight economic corruption and tax evasion.

It recently foiled a plot to embezzle 8.6 trillion rials (about $230 million at current market exchange rate) out of Iran and arrested the culprits, the ministry’s anti-corruption deputy, who was not named by IRNA, said on Saturday.

The ministry also recently arrested three Iranian Offshore Oil Company executives and four others who netted €200 million through a project tender.

According to the deputy, the intelligence agency’s assault on tax evasion increased tax returns by 20 trillion rials (around $537 million) in the last Iranian year (ended March 20, 2015).

The ministry also provides “specialized consultation services to the judiciary based on classified information”, he added.

Some steel industry executives were also arrested for insider trading. The executives were privy to non-public information about Hormozgan Steel Company. Using 160 billion rials (about $4.29 million) available to them from the company’s accounts, they allegedly bought Hormozgan in its initial public offering and dumped the shares later to earn 10 billion rials.

The Intelligence Ministry informed the judiciary, which issued their arrest warrants.

Corruption is just one part of Iran’s large gray economy—the part of an economy that is neither taxed nor monitored by any form of government. It’s the age of underground businesses in Iran.

Based on a study by Hamid Azarmand, director general of the Research Office of State Management and Planning Organization, the gray economy is expanding.

Of course, gray economy means you are in the realm of estimates. And to really tell whether under-the-radar economic activity is increasing, given far and in between statistics, one should watch for cues from the reasons propagating the rise.

Azarmand says high transaction costs brought about by bureaucracy, government meddling with wages and prices, recession and unemployment, internal immigration and high tariffs and import duties encourage businesses and people to deal under the table.

Iran is at the low-end of the barrel in ease of doing business, 130th out of 185 countries on the World Bank’s 2016 ranking. Growth has also stagnated. GDP grew 1% per year between 2008 and 2014, well below its long-term average and Iran’s potential as an emerging market.

Unemployment, especially among young people, has soared. Over 22.4% of people between the ages of 15 and 29 had no jobs in 2015, up more than two percentage points from a year before.

Needless to say, the stagnant economy is not producing jobs fast enough to keep up with the onrush of workers.

The Iranian government also keeps duties way above those of other countries, inadvertently making contraband extremely profitable.

Azarmand said all this is exacerbated by ambiguity in state operations, weak oversight and undeveloped markets.

“Corruption will in effect diminish investigators’ motivation and power in countering the shadow economy,” he said.

That’s where the government should start.