An official at the Central Bank of Iran says it has no plans to tax bank account deposits, noting that bank deposits are not legally taxable.
Responding to recent media speculation on the issue, Peyman Ghorbani, CBI deputy for economic affairs said there has been a misinterpretation of the Economy Minister Ali Tayyebnia’s recent comments suggesting bank deposits would be taxed” in the near future.
Tayyebnia had pointed to the negative effects of high deposit rates on investment and economic growth,” Ghorbani said. “Mr. Tayyebnia had said that one of the possible measures to address the issue of high deposit rates is to levy taxes. This, however, does not mean that the CBI indeed wants to tax bank deposits,” he told Tasnim News Agency.
Ghorbani recalled that the government has been against suppressing interest rates in the past two years and supports “real rates” on the basis of ground realities. “The idea of taxing bank deposits was floated by some camps because of the unreasonably high deposit rates and the gap between deposit rates and the rate of inflation.”
The Money and Credit Council – a decision-making body – lowered interest rates twice during the previous fiscal year that ended in March, in line with the government’s achievements in significantly curbing inflation. Inflation has declined from a shocking 40.4 % t in October 2013 to 11.2 % this April. However, interest rates still hover in the range of 18-20%.
Ghorbani said the CBI will continue the process of lowering the rates, adding that the banks may have had some minor violations in this regard but are mostly committed to the rates approved by the CBI.
On a related note, Ghorbani told state TV that “the CBI will help lower rates and bring about a reasonable rate that is 1-2 % above the inflation.”
Banking Woes
Banks, the capital market and foreign finance and investment constitute the three pillars of finance in Iran, the senior official added. He said that the onerous burden of financing businesses and projects has long been the function of banks. “The banking system shouldered 90% of financing in the domestic economy during the previous year, while the capital market’s share was 8% and foreign finance came in at 2%.”
Another major impediment the banking industry faces is the ballooning stressed assets and restructured loans along with the government’s debt to banks, Ghorbani complained. “The volume of non-performing loans is $27.2 billion and 33% of the banks’ balance sheets account for soured assets.”
The official pointed to the credit crunch plaguing the economy saying it is one of the most serious challenges the economy is facing. However, he warned against any hasty and imprudent pumping of cash into the economy. “Injecting money into the economy cannot settle all the evils visiting our economy. We must diversify the financing system and introduce policies and programs that support sustainable growth and production. ”
