Economy, Domestic Economy

Outgoing Taxman: 60% of Economy Do Not Pay Tax

Outgoing Taxman: 60% of Economy Do Not Pay TaxOutgoing Taxman: 60% of Economy Do Not Pay Tax

Seyyed Kamel Taqavinejad, serving as the managing director of Bank Sepah, has been named by the Cabinet on Sunday to replace Ali Askari as the head of Iran’s National Tax Administration.

Askari, 54, holds a PhD in economics from Tehran University. He took the helm of INTA in October 2009, under the administration of President Ahmadinejad, and stayed in office for six years.

In an interview with the Persian weekly Tejarat-e Farda prior to the Sunday announcement, the former official said about 60% of Iran’s economy do not pay tax.

Askari noted that currently 40% of the economy are exempt from taxes and underground businesses account for 20% of the country’s economy (which consequently slip under the tax office radar).   

“For instance, the agriculture sector, which comprises 10% of GDP, is free from paying tax. Tax exemptions apply to 33% of 22.9 million guild members. They do file returns, but don’t pay a penny in tax,” he said.

“Tax exemption rates are different in each province. For instance, around 15-16% of the guilds in Tehran are exempt from paying tax, while 45% of guild members in Sistan-Baluchestan Province don’t pay taxes.”

He also noted that exports, cooperatives, tourism and cultural sectors receive tax relief and underlined the fact that tax exemptions in Iran are much broader than in other countries.

On tax mechanism in Free Trade Zones, Askari said, “Investments and exports win tax relief, but imports are subject to taxation. All in all, Iran offers numerous tax exemptions and facilities.”

According to Askari, government revenues via taxation in the seven-month period ending October 22 stood at about $10.45 billion, which is 84% of the estimated target, as opposed to last year’s 90%.

The outgoing official added that the average tax rate on an Iranian legal entity is 25%, while people in many countries pay up to 35% in tax.

“Value Added Tax in Iran is 9%, while it is 15% in developed countries,” he said.

Askari said tax revenues account for 25-30% of GDP in developed countries, which is a significant figure during an economic recession.

“But in Iran’s economy, tax revenues constitute less than 7% of the GDP. Therefore, tax cuts do not promote economic growth,” he said.