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The government is seeking new sources of revenue in the new fiscal year’s budget.
The government is seeking new sources of revenue in the new fiscal year’s budget.

Gov’t Borrowing Doubles to Cover Ballooning Deficit

The government’s overall revenues during the eight months stood at 247.4 trillion rials ($5.62 billion), posting a rise of 12.4%, while its spending hit 642.8 trillion rials ($14.6 billion) to register a 39.6% growth year-on-year

Gov’t Borrowing Doubles to Cover Ballooning Deficit

To cover its widening budget deficit of 395.4 trillion rials ($8.98 billion) in the first eight months of the current fiscal year (March 21-Nov. 21), the government had to issue 106% more bonds compared with the corresponding period of last year.
According to the latest report of the Central Bank of Iran, 583.3 trillion rials ($13.25 billion) worth of bonds were issued during the period under review.
The government’s overall revenues during the eight months stood at 247.4 trillion rials ($5.62 billion), posting a rise of 12.4%, while its spending hit 642.8 trillion rials ($14.6 billion) to register a 39.6% growth year-on-year.  
Revenues associated with the sales of oil and petroleum products amounted to 536.8 trillion rials ($12.2 billion), indicating a 46.2% YOY rise but lower than the projected 767.6 trillion rials ($17.44 billion).  
Although tax revenues were estimated to hover around 784.9 trillion rials ($17.83 billion), they only reached 600.6 trillion ($13.65 billion), registering a 3.1% increase YOY.
The government’s tax revenues consist of returns from direct and indirect taxation. Direct taxes include three groups of “tax on legal entities”, “income tax” and “wealth tax”.
Overall, direct tax revenues stood at 299.8 trillion rials ($6.81 billion) during the eight months, registering a decline of 3.4% YOY.
Indirect taxes, including “tax on imports” and “tax on goods and services”, reached 300.8 trillion rials ($6.83 billion), indicating a 10.5% rise YOY.  
Tax on imports generated 69.6 trillion rials ($1.58 billion), 11.2% more than last year’s corresponding period while tax on goods and services earned the government 231.2 trillion rials ($5.25 billion), up 10.3% YOY.
Value added tax, which is a subcategory of tax on goods and services, increased by 18.4% to reach 160.2 trillion rials ($3.64 billion).
The report also shows the government spent 292.1 trillion rials ($6.63 billion) on development projects, 95.8% more than the similar period of last year but much lower than the projected 481 trillion rials ($10.93 billion).

> History of Running Deficits, Search for New Revenue Sources
The Iranian government has a record of running budget deficits. To cover that, it has grown accustomed to issuing bonds–the simplest way out albeit controversial, considering the payback implications as it risks drowning more and more into debt.
The government plans to issue 260 trillion rials (around $6 billion) worth of Islamic bonds in the next fiscal year (starting March 21).
According to Managing Director of Central Securities Depository of Iran Gholamreza Aboutorabi, the projected debt issuance is 30% higher compared to what was forecast for the current year.
The government says it will use the funds raised from issuing bonds to finance the completion of development projects.
Cognizant of this shortfall, the government is seeking new sources of revenue in the new fiscal year's budget. In the budget bill submitted by President Hassan Rouhani to the parliament on Dec. 10, the government is looking to save 188 trillion rials (about $4.2 billion) by removing 34 million people from the list of cash subsidy receivers.
Government Spokesman Mohammad Baqer Nobakht said all these resources will be directed to those who really need the aid.
As part of the Subsidy Reform Plan, the government of Rouhani's predecessor removed subsidies on food and energy in 2010 and instead paid 455,000 rials ($10.8) to each Iranian on a monthly basis.
The Rouhani administration has retained the plan reluctantly, yet it has moved to restrict the number of cash subsidy recipients, slowly but steadily.
The government is also looking to increase energy prices, but the move risks leading to a dramatic rise in inflation.
And yet another controversial move stipulated in the budget bill is to raise the fee for outbound travelers from Iran, otherwise known as "departure tax". Majlis Joint Commission okayed the government-proposed threefold rise in departure tax from 750,000 rials ($17) in the current fiscal year (March 2017-18) to 2.2 million rials ($50) next year.
The tax for tourists heading toward religious destinations, namely Iraq, Syria and Saudi Arabia, remains unchanged at 375,000 rials (about $8.5) for air travelers and 125,000 rials (about $2.8) for road travelers.
The decision has met with widespread public opposition.
All the budgetary decisions on the part of the government will be put to a vote by lawmakers in the Iranian Parliament. The final decisions need the approval of the Guardians Council before they are enforced as law.
The joint commission is a legislative body responsible for reviewing the budget bill as well as five-year development plans proposed by the government before it is put to a parliamentary vote.

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