Iran Tax Office: Banks Obliged to Report Financial Statements of Clients

EghtesadOnline: To help bolster government efforts to modernize the ageing tax regime, banks have been ordered to send data on the financial transactions of tax payers to the Iranian National Tax Administration, head of INTA’s Tax Inspection Department said.

News ID: ۷۴۸۵۴۸

28 September 2019

The move is in line with legislative frameworks both in the annual budget law (March 2019-20) and tax regulations, according to Hadi Khani.

Referring to the budget law, Khani said the provisions therein allows INTA to have access to financial statements on a monthly basis instead of annual reports, Financial Tribune reported.

“INTA was earlier authorized to access annual banking statements as per the Value Added Tax Act and Direct Taxes Act,” Tasnim News agency quoted him as saying.

The INTA chief, Omid Ali Parsa, had said recently that plans have been finalized to modernize the tax regime by using verifiable information about the financial turnover of taxpayers.

As per the national budget, if and when INTA sends a request banks and credit institutions must provide information on bank accounts and transactions (both interbank and intra-bank) of taxpayers.

In addition, the law allows the Central Bank of Iran to freeze bank accounts of clients who do not have the new national ID number.

The CBI is required to set a ceiling on money transfers and report all transactions above the threshold. The ceiling can be universal (same threshold for all) or subject to change on a case-by-case basis.

To transfer money above the legal level, applicants are required to state the “reason” for transferring money, and when necessary, must present documents to support their claim(s).

The tax authority now has data about target customers’ performance in the past three years, Khani said.

The senior taxman emphasized that INTA only monitors bank statements of selected people.

Pointing to the millions of transactions of bank customers, he stressed that INTA simply has no need for such data.

To compel lenders to cooperate with INTA, the Majlis has given the taxman the legal jurisdiction to impose fines up to 2% of total deposits held with banks and credit institutions if they refuse to comply.

The measure is seen as a practical and possibly effective move to fight widespread tax evasion in the country, particularly at a time when the government is struggling to pay its bills due to the steep decline in oil revenues.

According to Khani, INTA identified and collected unpaid taxes to the tune of 184 trillion rials ($1.5 billion) in the last fiscal year that ended in March. Of this amount 147 trillion rials ($1.2 billion) was detected by monitoring suspicious transactions.

Reports from the Economy Ministry estimate tax evasion to be in the neighborhood of 35% of total tax revenues.

The circular sent to banks has been welcomed by the Majlis Research Center, the influential parliamentary think tank.  The influential research institute says the initiative will increase the regulator’s supervisory clout over cash flows that in turn mirrors the flow of goods and services to and from the country.

It is of the opinion that “the measure will prevent criminal activities related to money laundering and disruption of the economic system,” among other things.

The move, according to the MRC, is expected to lead to significant rise in tax revenues while providing grounds for levying tax on foreign exchange, gold coins, and housing deals, which should eventually redirect liquidity into production sectors.

The government generated 1,090 trillion rials ($9.5 billion) in taxes in the last fiscal year. In the budget for the current fiscal year 1,400 trillion rials ($12.2 billion) has been projected in tax revenues.