Economy, Business And Markets

Dependency on Construction Taxes Perilous

Finance Desk
Dependency on Construction Taxes Perilous Dependency on Construction Taxes Perilous

The deputy minister of roads and urban development said Sunday local city administrations are too dependent on taxes as municipalities generate a significant portion of their annual earnings from taxes levied on construction.

“Data has it that municipalities earn 79.6% of their total income directly from construction permit fees and other construction taxes such as fees charged for  land scarification and penalties on builders who do not allocate space for parking lots in the their projects”, said Piruz Hanachi told a press briefing.

President Hassan Rouhani recently referred to a lack of stable sources of income for the municipalities, warning it causes problems in metropolises and towns alike. “As much as over-reliance on oil export income is bad for the country, the dependency of municipalities on taxes is worse,” he said.

Echoing the president’s remarks, the deputy minister was quick to add that the aforementioned taxes differ from those levied by municipalities on utility bills, renovation projects, businesses and airfare. These revenues form a further 12% of the operating income of municipalities. This high level of dependency, he says, “cannot possibly help improve urban development.”   

Hanachi stressed that the unacceptably huge dependency on construction taxes is not a recent phenomenon, noting that an analysis of data going back almost 10 years ago shows similar conditions. “If we continue on the present course, we will without doubt face serious problems in running this city (Tehran).”

The deputy minister noted that since 2005, problems facing municipalities have grown in scale and scope. “Running a city in this manner is in stark contrast with goals designed to achieve and promote sustainable development.”

He told reporters that urban mismanagement in recent years in the sprawling capital had indeed deprived businesses and the people of their calm and tranquility.”

On the issues of high-rise construction, Hanachi spoke of the 156 directives issued between 2011–2013 for the 22 Tehran districts, saying that with 36 directives, the upscale District One has been the subjects of most of the directives.

Districts 1-6 have had the highest number of demand regarding the construction of high-rises, but the real cause of concern is District 22, which the deputy minister likened to a “train that has run off its rails.” An unusually high number of construction permits have been issued in the district and “has caused it to become completely disconnected from the ‘Comprehensive Construction Plan’ across the capital.”

There have been reports and rumors about a possible shifting of the capital from Tehran to another city. Hanachi noted that this plan did not originate from the government and because it entailed very high costs it was rejected by the Guardian Council.

He, however, added that it (moving the capital) is not an issue strictly related to the constitutionally-mandated 12-member council. “Even if talks about shifting  the capital city is political in nature, it must first be discussed in the Supreme Council of Architecture and Urban Development.”