Taxation will cover 44% of the government’s expenses this year, according to Iran National Tax Administration’s head of Direct Taxation Department.
“We predict tax revenues to reach 870 trillion rials ($22.45 billion at market exchange rate) this year, 60% of which will be raised through direct taxation,” Nader Jannati told IRNA.
Jannati said small business owners and professionals will only cover 6% of the 500 trillion rials that will be raised through direct taxation.
“Most of the revenues will be collected from companies and wealthy individuals,” he said.
About 12% of the revenues will come from taxing government and private sector employees, double the amount raised from business owners.
According to INTA CEO Kamel Taqavinejad, the tax administration is establishing a special office to tackle tax evasion.
The formation of the High Office for Combating Tax Evasion will help the government increase its low tax receipts.
Government tax revenues accounted for hardly 6.3% of gross domestic product in the fiscal year that ended in March. That is lower than what Iran’s war-ravaged and poverty-stricken neighbor, Afghanistan, can muster. The average that member states of the Organization for Economic Cooperation and Development—a club of developed economies—collect is 34.8% of GDP.
Low oil prices, deep recession and a legacy of atrocious public finances have forced the government’s hand. Now it is making every effort to overhaul the tax regime to increase revenues.
“Tax authorities raised 275 trillion rials ($7.76 billion) from value added tax and direct taxes in the first quarter of the current fiscal year (March 20-July 21),” IRNA quoted Taqavinejad as saying. That’s a 29% increase compared with the same period of last year.
According to the INTA chief, tax revenues are just five percentage points off what the administration had planned to raise during the period.
INTA has a lot of ground to cover, owing 493 trillion rials in tax from prior years.
Taqavinejad plans to collect 45 trillion rials ($1.27 billion) of it before the end of the fiscal year.
However, the real battle is about curbing tax evasion and fraud, considered to be widely prevalent in Iran.
Taqavinejad estimates that between 130 and 300 trillion rials ($3.67-8.46 billion) worth of taxes are being evaded.
The main missing factor for the tax administration is data. INTA says it has come up with new databases and data-matching software to catch tax evaders as electronics will make falsifying records, hiding assets and other swindling ploys harder to pull off.
“The focus is now on expanding the tax base and targeting entities currently exempt rather than raising taxes for those already paying,” the government spokesman, Mohammad Baqer Nobakht, said earlier this year.
According to Economy Minister Ali Tayyebnia, the government’s newly-drafted direct taxation code overhauls tax exemptions, adds new taxpayers and is geared toward boosting manufacturing.
