Economy, Business And Markets

Law to Tighten Screws on Tax Evaders

Business & Markets Desk
The Iranian National Tax Administration wants banks, stock exchanges, insurers, etc. to provide it with data, so it can track anomalies and efficiently calculate due tax
Former INTA Chief Ali Asgari
Former INTA Chief Ali Asgari

Higher tax revenues have always been a dream for the government. Though it is not smoothing shared by all in high places. Easy oil money meant that tax revenues were never really needed. So, adequate regulations and institutions for collecting taxes were hardly developed. Furthermore, rampant corruption erected big walls against any government that wanted to break from the past. The latter's effect should not be underestimated when thinking of Iran's weak tax regime. Tax authorities obviously face an uphill task against tax evaders.

One key missing ingredient for the Iranian National Tax Administration is reliable data. It needs a clear picture of economic activity. "Countries that have curbed tax evasion have concentrated on information transparency," said former INTA Chief Ali Asgari in an interview with our sister publication, Tejarat-e-Farda weekly.

Many organizations used to refuse to divulge information citing the law, as the law was unclear about the extent of INTA'a rights. "We don't have coherent laws." Tax evaders and their political supporters have exploited these loopholes to the fullest. That is set to change this year, however, as the new tax code takes effect. INTA wants banks, stock exchanges, insurers, etc. to provide it data, so it can track anomalies and efficiently calculate due tax.

"The protocols are in place and everything is set, so they should not have any excuses anymore," said Asgari.

Banks have been at the forefront of resisting the INTA. They are making up "excuses", in Asgari's words. "Banks wrongly assume providing INTA with information about their clients will lead to losing customers. But if all banks start providing information, then what happens? Will the people pull their money out of the banking system?"

Long and Ending Lists

The list of those fighting against taxation is long and unending. Recent studies show a quarter of the economy is avoiding taxes. Fraud is rampant even among those that are being taxed. Sales invoices are doctored as a norm. In one incident a forger was arrested with stamps of over a 100 fake companies, according to the former INTA chief. Some salesmen refer you to these fraudsters, if you ask for a sales invoice.

"Companies have been registered about which the INTA knows nothing," said Asgari, who complains that official organizations should work more closely with the INTA. He adds that many efforts at financial transparency have been blocked by unions and guilds. They protest about contraband and trafficking of goods, yet they want the government to stay in the dark about things.

"Many of those who are protesting are the worst offenders," said the former official. That's where things get tricky. Asgari says one of the MPs who summoned the economy minister for questioning on taxation, himself had a tax case against him and evaded taxes for six years.

"We are not targeting shopkeepers here. The issue is about people who have vested economic interests. They are the real tax evaders."

Now that regulations have been updated, "they still try to question the law, and are pushing to have the law changed," said Asgari. With new regulations in place, the stage is set for change. But the former official believes it will still take the might of the government and parliament to set things in motion. The INTA faces resistance at every step of the execution process. Many dislike the new laws, they will never stop.