Iran Tax Administration Working to Systematize Tax Regime

EghtesadOnline: The tax collection system is obsolete and needs rewriting to find its proper place in the running of the economy, Iran’s top tax official said at the weekend.

News ID: ۷۴۸۳۳۱

02 September 2019

Omid Ali Parsa, head of the Iran National Tax Administration said, “Tax revenues hardly have seven to eight percent share in the gross domestic product. In other countries this contribution is 25% and maybe higher.”

In a meeting with stakeholders in the financial market, Parsa criticized the old and dysfunctional tax regime and said it must be reformed sooner rather than later, IRNA reported.

Echoing the stance of independent economic and financial experts, the INTA chief said, “One reason for the meager tax revenues is the tax holiday and tax evasion.”

Without going into details, according to Financial Tribune, he said tax exemptions have been given to different sectors of the economy like the free trade and industrial zones.

“People try to use (abuse) existing loopholes in the law to evade taxes,” and this needs to be addressed.

Given the difficult economic conditions “there is no space for accommodation with or concession for” those not playing by the rules, the state news agency quoted him as saying.

Proper Verification

In a speech at a religious congregation in the capital last month Parsa said INTA is in the process of modernizing the tax regime with the help of “verifiable information about the status of taxpayers.”

"How can we provide for social expenses, including for education, healthcare, law and order and huge infrastructure projects?" he asked.

"There are basically two ways to do this. By collecting tax proportionate to income and consumption, which is in line with social justice. The other way is by printing money that gives rise to inflation, which is in turn a type of tax whose pressure is felt mostly by low and middle class, retirees and the deprived.”

According to published reports, tax evasion is in the region of 300-350 trillion rials ($2.34b-$2.73 billion).

The Economy Ministry estimates tax evasion is at 35% of total tax revenues of the government.

INTA is setting up a special court in Tehran that will only handle tax cases.

Value added tax accounts for the lion’s share of total tax revenues in Iran with 23.5%, as per INTA figures, followed by corporate and import taxes. This is while income tax makes up the biggest share of tax revenues in high-income countries. Corporate (company) tax is the second top earner of such revenues in Iran.

According to the World Bank Iran has made tax payment easier by introducing an online system for filing social security contributions, allowing the filing of value added tax refund claims online, amending corporate income tax returns online and making payment of additional tax liability at the bank.

The government earned 1,090 trillion rials ($7.26 billion) in tax revenues during the last fiscal year that ended March 20.