The tax-exempt status of some institutions should be canceled, sanctions must be lifted, the business environment ought to be improved and most importantly, decent cultural, recreational and welfare services need to be provided in exchange for collecting taxes.
This was stated by Ali Mazyaki, professor of economics at Allameh Tabatabai University, in an article for the Persian daily Ta’adol. A translation of the text follows:
Following the announcement of the government’s decision to tax bank accounts that register more than 100 transactions or a turnover of 350 million rials ($1,100) per month, a wide range of criticisms, analyses and evaluations were made regarding different aspects of the issue which, I believe, are ultimately beneficial to the people. I also believe that the issue needs to be analyzed from the perspective of both parties involved, i.e., the government and taxpayers.
The government justifies this measure based on the assumption that it has a widening budget deficit under sanctions regime and therefore it is unable to pay employee remuneration, cash subsidies and capital expenditure budget. The government believes it has the right to use any capacity to tackle budget deficit but people who are going to bear this tax burden (and other taxes) have a different logic; people didn’t ask for sanctions or lack of efficiency of government or the unreasonable size of the government, or the rampant corruption and mismanagement in the country.
They wonder why they should pay the price of government’s mismanagement. After all, the first step in reducing the budget deficit and meeting the spending needs is to shrink the government and increase productivity in various sectors. But not only has the government failed to take a step toward these goals, it has recently sought to enlarge the government through the separation of ministries. This unproductive structure naturally requires more money.
Non-Transparent Tax System
By increasing taxes, the government intends to offset the costs of sanctions, Covid-19 pandemic, lack of productivity, the size of government, corruption and mismanagement from the people’s pockets. Therefore, people will oppose this form of injustice.
Notably, all economies that raise taxes provide services for the people in exchange: services in transportation, health, entertainment, etc. Such an approach has never been taken in Iran’s economy; people do not know what these taxes will be used for.
Why should people pay for government employees and certain cultural institutions that are redundant and unproductive?
Such a trend makes public aware of non-transparent economic sectors and accelerates capital flight. Wealth tax and value added tax are based on a transparent system; people know what added value the payment of one dollar or one euro in tax generates. Iran’s taxation system, however, lacks such transparency and it is not clear where the tax money goes. People only vaguely know that there is a budget deficit and the government needs money to offset it.
It is very difficult to build a culture in which people accept this “general payment norm”. Even in many European countries, people resent the burden of taxes. It is only in the United States that such a norm has been internalized and tax avoidance pricks people’s conscience.
Wide-scale efforts should be made to normalize this behavior among the Iranian people. But before that, transparency should be created in the economy. Tax-exempt status of some institutions should be canceled, sanctions should be lifted, business environments should be improved and, most importantly, suitable cultural, recreational and welfare services should be introduced for collecting taxes.
