Economy, Sci & Tech

Taxman Knocks on Online Business Doors

Taxman Knocks on Online  Business Doors
Taxman Knocks on Online  Business Doors

Online business owners have recently received tax papers from Iran's National Tax Organization, which has caused concerns among many young entrepreneurs.  

Before launching their businesses, these enterprises had obtained the electronic badge of trust “eNamad” via Iran's Center for eCommerce Development.

The owners were required to provide details about their business premises and working hours. The organization has apparently used the same information to levy taxes, Donya-e-Eghtesad reported.

This issue has caused distrust among business owners who claim they had not been previously informed of the fact that the information furnished by them will be used for tax deduction.  

While Iran's sixth five-year economic development plan (2016-21) mentions extension of incentives for supporting and developing online businesses—such as tax concessions—Secretary of the Association of Internet Businesses Reza Olfatnasab said the activities of Internet businesses have not been differentiated from traditional businesses.

Olfatnasab has written an open letter to the head of Iran's Center for eCommerce Development, Mohammad Garakani, demanding clarification regarding the formulas used for calculating the amount of tax levied on Internet-based businesses.

Garakani said all businesses must pay their taxes, while declaring the complaints made by e-businesses to be "illogical."

 "If Internet business owners believe that the implementation of regulations for e-businesses are faulty, they will have to provide evidence and call for the revision of laws," he said.

The official added that if an Internet-based business, which had previously received the eNamad symbol, decides to opt out of the legal system and continues to operate independently, they will be fined for illegal activities. He, however, did not elaborate.

Olfatnasab said "all we have gathered so far is that in order for our complaints to be looked into, we must write a complaint, which will be passed by the eCommerce Development Center to the corresponding state organizations".

The official noted that certain businesses had attempted to register and were granted the eNamad certificate as early as 2013, while they had not officially launched operations until after two years.  The tax organization, however, has charged them from the point of registration, not factoring in the fact that the businesses were not making any money during the first two years of operations.

"We want to know whether the tax concession would be implemented or not," he said.

"We are not saying we do not want to pay tax; what we demand is clarification of the issue."

Olfatnasab also said several newfound Internet businesses in Iran are run by young and innovative university students who do not have the needed capital to pay the heavy taxes, adding that the imposition of hefty fines and taxes will only prompt them to continue their activities underground.

Some young business owners have said that they had not been taxing their customers while "the government now expects us to pay money we have not even made", he said.

In view of this new development, some have said that they are likely to lose up to 90% of their customers as shopping online would neither be economically justifiable nor will it have any advantages above shopping at physical stores.

Olfatnasab further said that apart from earning revenues and creating jobs, Internet-based businesses are effective in reducing traffic, unnecessary commute and air pollution, which is why the government should show greater support to this sector.

The complaints by Internet businesses are one of a growing number of sub-sectors unhappy with the direction Iranian authorities have taken over the past 12 months. Many companies cite antiquated taxation policies and overzealous tax officers as one of the many fallouts of the Rouhani administration's insistence that the share of tax revenues in the economy should increase.