Economy, Domestic Economy

Majlis Will Amend Controversial VAT Law

Majlis Will Amend  Controversial VAT Law
Majlis Will Amend  Controversial VAT Law

The parliament is to review and possibly make changes to certain provision of the VAT law, as business people in various sectors have opposed it.

“A comprehensive draft proposal to amend the VAT law has been prepared and referred to various parliamentary committees for technical review. It will then go to the floor for final vote,” Ebrahim Dorosti, vice chairman of Tehran Chamber of Guilds.

The move comes as most business owners have expressed concerns about VAT, which is almost a new law to the Iranian market. At the moment, all manufacturers, importers, vendors and distributors are required to pay an 8% VAT, “while it is basically a consumption tax,” he said.

The VAT law was put into effect in 2008, when the sales tax rate was originally 3%. Since then, many businesses including gold dealers have opposed the law, arguing that the tax would affect their market considerably.

Alireza Taribakhsh, deputy director of Tax Affairs Organization of Iran, had earlier defended the law as an “effective” way to inflict direct losses on smugglers and serve the interest of consumers and producers.

He highlighted that the law, initially enforced in October 2008, was intended “to reform tax system, regulate economic transactions, promote official bill exchange between buyers and sellers, help create transparency and identify hidden hands involved in economic activities agitating the market and stuffing it with low-quality foreign goods through bypassing import regulations.”

Similar to other types of tax, he added, the VAT is also to generate revenues for the government which in turn, increases social spending and public welfare. This remains an area where the Iranian government still needs to work on, 85% of tax revenues are currently coming from only 7 big cities, according to Davoud Danesh Jafari, chairman of the Supervision Commission of the Expediency Council – a top body that has supervisory and arbitration powers over other parts of the government.

To redress the situation, therefore, according to Chairman of Tehran Chamber of Trades, a comprehensive draft proposal to amend VAT Law has been prepared and referred to various parliamentary commissions for technical review and will be presented to the Parliament floor for final approval upon completion.