Steelmakers have recently voiced their displeasure over taxation, saying the process puts unfair pressure on manufacturers and further depresses the recession-hit industry.
Nearly a dozen steelmakers are listed on Tehran Stock Exchange. Most have their stocks full, as they struggle to find domestic buyers since exports are not an option, what with the current sanctions making money transfer difficult.
Furthermore, “the state of the banking and taxation system are exacerbating the steel market’s recession”, Hamidreza Taherizadeh, chairman of Saba Foulad Zagros, told Financial Tribune’s sister publication Donya-e-Eqtesad.
“Merchants who provided cheap money to manufacturers have gone out of the picture, leaving banks as the only source of money. And banks are charging very high rates, if they lend you money in the first place,” he added.
As for taxation, steelmakers list a multitude of issues, including the merciless attitude of taxmen, ambiguous laws, heavy penalties and value added tax, as barriers to their business as well as other industrialists.
All of this means manufacturers have to set aside high legal fees, come tax season.
Conversely, when it comes to tax exemptions and value-added tax, laws mean nothing to tax authorities, the executives claim.
The government has awarded tax exemptions for constructing plants in underdeveloped regions of Iran. But the tax authority is currently disregarding these exemptions.
“After plants are constructed in deprived regions, investors have to prove this to get tax exemptions, but proofs are rarely accepted,” Taherizadeh said.
Issues also arise when collecting VAT. Some steel buyers, for instance, are not registered with the government or provide false identification, and manufacturers have no way of ascertaining the truth. In these instances, as the tax office cannot track the buyers, it levels the tax on the manufacturers, fumbling the whole concept of VAT as it should be levied on the final consumer.
Tumbling oil prices have eroded the government’s major source of revenue, forcing it to take serious steps to raise tax revenues.
The government introduced new penalties for tax evasion this Tuesday. According to ISNA, tax evaders now face six months to two years of imprisonment and being barred from economic activities and social rights for up to five years among others. New tax courts will also be created.
An ailing tax system leads market activists toward black market trading. We certainly must not forget that over half of the economy is not being taxed, the president has said, and here lies the nuance of the story. The government must discern between tax evaders and businessmen who want to pay their dues and get on with business.
In today’s competitive world, creating a clear tax law that is not open to interpretation is a prerequisite for economic growth.
