Next Tax Structure Eyes Car Owners: Iran Budget 2019-20

EghtesadOnline: In the coming fiscal that begins in March, the government expects to generate 99 trillion rials ($926 million) from taxes and duties on car production and imports along with auto-related services plus traffic and driving tickets.

News ID: ۷۴۶۴۰۴

01 January 2019

As per the 2019-20 budget bill submitted to the Majlis last week by President Hassan Rouhani and published on the website of the Plan and Budget Organization (PBO), the government expects to make 40 trillion rials ($374 million) in traffic and driving fines. The amount accounts for 40% of the government’s $926 million projected income from the huge auto sector.

Iranian drivers are notorious for flouting driving rules and disregarding safety measures. According to Traffic Police, sleep-deprivation (fatigue), speeding, overtaking from the wrong side, running a red light, talking on the cell phone, text messaging and munching behind the wheel is among the serious driving violations leading to disaster on the road.

The Iranian Legal Medicine Organization says during the first half of the current fiscal year to September, over 8,800 road deaths were recorded, which is 1.7% higher than the corresponding period last year when 8,600 innocent lives were lost, Financial Tribune reported.

Vehicle Related Services

In the proposed budget, the government has said it plans to earn 7.8 trillion rials ($73 million) only from services related to transfer of vehicle ownership.

The government has also forecast 21.6 trillion rials ($202 million) in revenue from issuing vehicle number plates and relevant taxes.

From issuing and renewing driving licenses it expects to make 1.1 trillion rials ($10.2 million). The administration also says it could collect 150 billion rials ($1.4 million) in fines from those who delay renewing their driving licenses.

In addition to their national ID card and driving licenses, Iranian motorists must always carry a card that identifies the vehicle. The card is locally known as ‘Vehicle Card’ and motorist must present it to the police officer on request, to the Law Enforcement Forces when buying/selling a car and to the auto insurance company when renewing the mandatory annual insurance policy.

The government has initiated a plan to issue special electronic cards for motor vehicles and says from this source it would collect 1.2 trillion rials ($11.2 million.

Among its other income prediction is  2 billion rials ($18,690) from the mandatory auto inspection services that ensure acceptable emission rates and conformity with safety rules.

The government also expects 19 trillion rials ($177.5 million) from insurance firms via taxes levied on the mandatory third-party car insurance policies.

Tax and duties on car imports for long has been among the government’s major sources of income. However, vehicle import is hardly mentioned four times in the new budget

Car Imports

Following US President Donald Trump’s decision in May to pull out of the international Iran nuclear deal and re-sanction Tehran, the rial tanked and its value plunged to unprecedented lows.

In the process, foreign currency became precious and there was not enough of it to import costly goods, namely cars. Following months of chaos in the imported car market , in June 2017 the government  banned all auto imports.

High tariffs and taxes on car imports for ages have been among the government’s major sources of income. However, vehicle import is hardly mentioned four times in the 2019-20 budget bill.

In two instances government income from “additional taxes and duties” levied on car imports is mentioned, which could reach 2.5 trillion rials ($23.3 million). It is not clear how the government wants to earn this amount when car imports are banned for almost 20 months.

Furthermore, in a third instance, the administration predicts to earn 100 billion ($934,570) from tax and duties on "car imports and production”. In previous budget bills, production and import taxes were mentioned separately.

The bill further adds that the government intends to collect 4 trillion rials ($37 million) in extra taxes that buyers of imported vehicles must pay for receiving number plates.

General revenues in the budget bill stand at 4.07 quadrillion rials ($38.03 billion), up 5.44% compared to the budget for the current fiscal.