Economy, Domestic Economy
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Call for Reforming Tax System

Call for Reforming Tax SystemCall for Reforming Tax System

With proper planning, we can reduce tax evasion by at least 60 to 70 percent, head of Iran’s National Tax Administration (INTA), Ali Asgari said on Sunday, noting that “tax evasion in Iran currently stands at nearly 20-25% of the gross domestic product (GDP).”

“As much as 96% of the tax revenues anticipated for the current Iranian year (ending March 20) have been collected so far, and 750 trillion rials ($27.07 billion at official exchange rates) in tax revenues is anticipated for the upcoming Iranian year,” IRNA quoted the official as saying on the sidelines of a meeting between high-ranking judicial authorities and INTA officials.

Over the past years, successive governments have planned ways to lessen dependence on oil export revenues and prop up tax revenues as the primary source of income to run the affairs of 80 million Iranians. But easy access to high-powered money coming from the second largest oil and gas reserves in the world seem to have deterred policy makers from pursuing this inevitable direction over the past decades.

But, in the light of declining international oil prices, the Rouhani administration was compelled to reduce the oil revenue projection in the budget for the next fiscal year. This means the government must either increase the tax base or find a way to curb tax evasion.

  No Plans to Increase Tax Base

“The government has no plans to increase the tax base in the coming year, but will rather seek ways to identify tax evaders and arrive at a more realistic assessment of the profits made by different businesses,” said the INTA head.

Senior economist, Jamshid Pajoohan believes Iran’s taxation system needs to “undergo major reforms to increase its efficiency,” in an interview with State TV on Friday.

“An efficient taxation system would enable the government to generate sufficient revenues to compensate loss of income from low oil prices,” IRNA quoted the expert as saying.

Given that the global slide in oil prices is draining billions of dollars off government coffers, economists have been long arguing that the government is not left with many alternatives to finance its spending.

They suggest that the government should rely on taxes for a major part of its annual revenues, given that taxes provide a sustainable source of income for that is not susceptible to the global policies and volatilities.

  Unnecessary Tax Exemptions & Rebates

Economic expert, Ali Dini also believes the government could compensate reduced oil revenues by doing away with the unnecessary tax exemptions and rebates offered to certain sectors and institutions in the past, IRNA reported.

For example, he noted that the country’s free trade zones which were offered tax exemption for 15 years, have been enjoying life-time tax exemption due to the lack of proper regulations and law enforcements.

Observing that taxes account for only about 9% of Iran’s GDP, Dini said the figure stands at 20-30% in other countries, indicating that Iran has much higher capacity for generating tax revenues by reducing tax evasions and tax exemptions.

INTA is a government organization affiliated to the ministry of economic affairs and finance. The body is responsible for administrating tax plans and carrying out the legal duties concerning tax collection. It also monitors the enforcement of tax laws and regulations to increase the efficiency of the taxation system.

Financialtribune.com