More Tax Revenues in Budget Face Collection Challenges

EghtesadOnline: The budget for the upcoming Iranian year (starting March 20, 2017) stipulates that the government will earn 1.13 quadrillion rials ($29.89 billion) from taxation–21% more than what is expected this year, the head of Iran Chamber of Commerce, Industries, Mines and Agriculture said.

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25 February 2017

“Majlis Research Center is expecting the realization of only 930 trillion rials ($24.6 billion) of the projected tax revenues by the yearend,” Gholamhossein Shafiei was also quoted as saying by IRNA.

Earlier in February, Chairman of Iranian National Tax Administration Kamel Taqavinejad said INTA had earned 810 trillion rials ($20.9 billion) in tax revenues since the beginning of the year.

“An aggregate of 1,010 trillion rials (about $26 billion) is projected to be earned from tax and duties by the yearend,” Financial Tribune quoted him as saying.

Last year’s tax revenues, excluding earnings from duties levied on goods and services, stood at 680 trillion rials ($17.6 billion).

“Tax revenues constitute 36% of the government’s total revenues and close to 50% of the current budget come from tax collections. Recovering unpaid taxes is INTA’s priority this year. Up until now, the administration has managed to collect nearly 135 trillion rials ($3.5 billion) of arrears,” he said.

About 60% of Iran’s economy do not pay tax, including 40% that are exempt from tax and 20% that evade tax payment. Tax evasion is estimated at 300 trillion rials ($7.7 billion) annually.

By rolling back tax breaks, the government could, at least in theory, cut its budget deficit, which amounted to 268.9 trillion rials ($7 billion) for the three quarters of the current fiscal year (March 20-December 20, 2016), the Central Bank of Iran said.

According to Taqavinejad, value added tax and duties on goods and services account for half of tax revenues and the remaining 50% come primarily from direct taxation.

The tax-to-GDP ratio in Iran stands at 7.3%, which should rise to around 11% as per the sixth five-year development plan (2017-22).

Tax revenues account for 25-30% of GDP in developed countries.

Iran’s five-year plans offer a medium-term roadmap designed by the government and Majlis to help achieve sustainable growth, outlining strategies in its budget planning for the next five years.

The Iranian Parliament approved the outlines of the budget for the new Iranian year (March 2017-18) on Tuesday.

A total of 111 lawmakers voted in favor while 70 were against the figures proposed by Majlis Joint Commission, while five MPs abstained, IRNA reported.

The joint commission is a parliamentary body responsible for reviewing the budget bill as well as five-year development plans proposed by the government before its final ratification.

The general budget, excluding revenues earned by ministries and state organizations and companies, totals 3.45 quadrillion rials ($90.5 billion), which shows a 7.8% rise compared to the 3.2 trillion rials proposed by the government.

The figure shows a 17% rise compared with the budget law of the current Iranian year (March 2016-17).

The parliament-approved budget needs the final endorsement of the Guardians Council—the body in charge of ascertaining the constitutional and Islamic compliance of all laws—before it becomes a law.

President Hassan Rouhani submitted the budget bill to parliament early December.