Tax on Bank Deposit Account Earnings Not on Gov’t Agenda

EghtesadOnline: Economy Minister Farhad Dejpasand said taxing bank account earnings is not on the agenda and denied rumors that the government may do so as part of its efforts to increase non-oil revenues.

News ID: ۷۴۸۸۸۰

09 November 2019

“We are not going to create an unfair tax regime only to fund the government,” Dejpasand said, speaking in a meeting with private sector representatives in Shiraz this week.

The minster, however, confirmed plans to revise the direct tax rules, IRNA reported. “The Iranian National Tax Administration in collaboration with a council of experts is revising the Direct Tax Act… and the issue of taxing earnings on bank deposits is not in the cards,” he said.

In the same vein, the MP Gholamreza Tajgardoon told state TV that taxing bank deposits would lead to an exodus from banks and that the issue has been shelved completely, according to Financial Tribune.

The lawmaker noted that doing so would give rise to higher inflation that in turn would render depositing money with banks economically unviable. “If we want to tax bank deposits when the inflation rate is 40% and interest rates on bank deposits between 15-18%, the banking system would simply run out of money.”

Although taxing earnings on bank deposits is a common practice in many countries, there are fears that such a measure in Iran would give rise to already galloping inflation by pushing depositors to withdraw money from banks and move to other safe havens.

Kamran Nadri, a bank expert, believes that the matter needs to be viewed on a bigger scale to avoid new bouts of turmoil and chaos in the markets. “Interest on bank deposit earnings is currently much lower than the inflation rate hovering near 42%.

In short, the returns on money parked in banks are negative. If tax is added on the deposit earnings, the negative returns will get bigger.”