Economy, Domestic Economy

Trade Unions Demand Overhaul of VAT Act

Trade Unions Demand Overhaul of VAT ActTrade Unions Demand Overhaul of VAT Act

The government has been seeking to avoid budget deficits via spending cuts and tax increases; however, the policy has forced end consumers to pay high taxes on daily expenses such as electricity, natural gas, water, and telephone. As a direct result, the increased price of manufactured goods has continuously shrunk the purchasing power of households. On the other hand, smuggling and high tariffs continue to cripple domestic production.

Several members of trade unions’ faction in Majlis recently discussed hurdles faced by Iranian guilds with head of Iran Chamber of Guilds (ICG) Ali Fazeli.

The Value Added Tax Act is to be reassessed this year and modified as the previous version has been applied ineffectually and lacks transparency, according to the head of trade unions’ faction and a member of the Planning and Budget Committee of Majlis Shahbaz Hassanpour.

“We must come up with ways to make the total cost of goods more reasonable for the producers and help people in providing their basic needs as well as supporting domestic production,” said head of Economic Commision of Majlis Arsalan Fathipour.

Maintaining that the commission is ready to collaborate with the ICG to settle the chaos in prices and uphold the rights of both manufacturers and consumers, he stressed “ensuring transparency in trade through clear registration of capital inflows and outflows can be helpful in achieving the goal”.

Nasser Mousavi Largani, a member in trade unions’ faction present at the conference, also called for amendments to the act and reducing value added tax (VAT).

“The reported reduction in the inflation rate is not tangible for people as they continue to have to pay high prices for basic goods such as bread and poultry,” he said.

According to another trade union’s faction member Ghasem Azizi, poorly applied regulations have enabled certain entities to receive tax from people but refuse to give it to the government while those who are not allowed to receive tax are obliged to pay the government.

“Countries struggling with financial deficits manage their economy by relying on small enterprises that provide employment and spur domestic production. To promote such culture Iran must take similar steps,” he said.

Criticizing the unnecessary involvement of the government in matters of domestic trade and pricing, Hassanpour said: “The trade unions’ faction believes that supervision of domestic trade and pricing – currently managed by the ministry of industry, mine, and trade – must be delegated to guilds as the prominent sector in domestic trade while the industry ministry should solely deal with foreign trade and export,” he said.

The rate of value-added tax in the current Iranian calendar year has increased from 8 to 9 percent in accordance with Clause 2 of Article 117 of the Fifth Five-Year Economic Development Plan (2011-2016), which stipulates that the government increase VAT by one percentage point annually as of the first year of the program’s implementation.