Iran Budget Deficit Hits $6.5b

EghtesadOnline: Iran’s budget deficit came in bigger than expected in the first quarter of the current fiscal year (March 21-June 21) to reach 290.1 trillion rials ($6.59 billion), according to the Central Bank of Iran’s latest report.

News ID: ۷۴۵۸۱۶

07 August 2018

The shortfall for the period was larger than the budgetary forecast of 82.2 trillion rials ($1.86 billion).

The deficit is 66% more compared to the preceding year’s corresponding period.

To cover the budget shortfall, the government issued 57.3% more bonds worth 290.1 trillion rials ($6.59 billion) in Q1 compared to the corresponding period of last year, Financial Tribune reported.

Overall revenues during the three months amounted to 99.7 trillion rials ($2.26 billion), indicating a decline of 45.1% year-on-year, while spending hit 389.7 trillion rials ($8.85 billion) to register a 9.4% growth YOY.

Revenues associated with the sales of oil and petroleum products were more than the projected budgetary figure of 257.4 trillion rials ($5.85 billion), as they reached 326 trillion rials ($7.4 billion), indicating a 72.6% rise YOY.

The government allocated 226.7 trillion rials (about $5.15 billion) for development projects in the first quarter, which is remarkably higher than the capital expenditure of 8.2 trillion rials ($186.36 million) and the projected $3.59 billion in the budget law for the current year’s Q1.

Tax revenues were estimated to hover around 362 trillion rials ($8.22 billion) as per the budget law, but they reached 225.9 trillion ($5.13 billion) to register a 24.2% increase YOY.

The government’s tax revenues consist of returns from direct and indirect taxation. Direct taxes include three categories of “tax on legal entities”, “income tax” and “wealth tax”.

Overall, direct tax revenues stood at 91 trillion rials ($2.06 billion) during the period under review, registering a drop of 2.7% YOY.

Indirect taxes, including “tax on imports” and “tax on goods and services”, hit 134.9 trillion rials ($3.06 billion), indicating a 52.7% rise YOY.

The CBI report also shows tax on imports generated 36.9 trillion rials ($838.63 million), 104.8% more than the year before while tax on goods and services earned the government 98 trillion rials ($2.22 billion), up 39.3% YOY.

Value added tax, which is a subcategory of tax on goods and services, increased by 29.6% to 63.4 trillion rials ($1.44 billion).

“The Iranian National Tax Administration has recently floated the idea of introducing tax on capital gains to diversify its resources,” Kamel Taqavinejad, the head of the administration, said.

Capital gains tax is levied on capital gains or profits from the sale of specific types of assets. This tax is calculated on the profits or positive difference between the sale price and the original “purchase price” of the asset.

Apart from introducing new forms of tax, the government has been identifying new cases of tax evasion to increase revenues.

Economy Minister Masoud Karbasian recently said about 2,500 cases of tax evasion and 3,000 shell companies have been identified.

Noting that the ministry will not go easy on tax evaders, the minister said, “The Economy Ministry is making efforts to identify new taxpayers, prevent tax evasion and offer electronic services to facilitate taxation.”

According to Rasoul Saraeian, the head of Information Technology Organization of Iran, 100% of tax returns this fiscal year were carried out electronically.