Value-added tax revenue grew by 80% in the period March 21 to August 22, 2014 compared to the same period last year, contributing to 95% of Tax Affairs Organization’s budget.
However, officials say that despite the eye-catching success, VAT revenues earned from certain guilds including jewelry retailers remains low and far from reality.
During the first half of the year (March 21 – September 22), the average declared tax by jewelers was around 7.5 million rials per entity during the period. Therefore, TAO has conducted audits to discover how much the entities really earned, according to Alireza Taribakhsh, the organization’s VAT deputy.
“Jewelers do not use the standard bills defined by the organization and many of them still refer to old ones which is no longer valid exposing them to relevant VAT penalties which is much heavier than the usual tax-related fines and is sometimes three times higher than the due tax,” Taribakhsh added, as reported by ISNA.
Though TAO exempts taxpayer in some cases, the majority of jewelry retailers have been punished by paying fines twice their due tax, he said.
In general, not only jewelry retailers but other guilds including, but not limited to fabric sellers, iron and ore sellers, render least cooperation with the organization. Taribakhsh said he hoped that equipping shop owners with mechanized sales systems that issues relevant documents will help them observe the rules and regulations.
Article 121 of the Fifth Five-Year Development Plan (2011 – 2016) requires the ministry of industry, mine and trade to annually equip certain number of taxpayers with mechanized sales systems and oblige them to deploy the system regularly. Twenty guilds have been called upon in 2013 and 2014 and 10 new guilds are scheduled to join the system as of the start of new Iranian year (March 21, 2015). The invited guilds have seriously been advised to actively engage in the process as any negligence would deprive them of 120 million rials in tax exemption under Article 101 of the 2014 Direct Tax Law. In other words, those refraining will have to pay 20 million to 35 million rials in extra tax.
Article 21 of the Value-Added Tax Law provides a three-month deadline for tax payers to complete and send their tax declaration forms to the VAT portal at www.evat.ir. They are also required to calculate their due tax in the relevant tax period and pay accordingly. The deadline for the current tax period ends on October 7, 2014 and cases of non-payment of tax will be subject to relevant penalties.
Pilot enforcement of VAT law started in October 2008 for five years, however it was further extended for another 1.5 year to meet the provision of Article 117 of the fifth plan that requires VAT rate to increase from 3% to 8% within five years i.e., 1% increase each year.
In response to criticisms to the current 8% VAT rate, Taribakhsh said, “The global average of VAT is 15% to 25% and for certain goods it can even reach 45% in some countries. Therefore, the current 8% is not significant.”
