PBO Says Revolutionary Bodies Must Pay Tax

EghtesadOnline: The government announced on Monday that revolutionary organizations involved in economic activities must pay tax in the coming fiscal year that begins in March 2020.

News ID: ۷۴۹۲۲۴

18 December 2019

According to a statement issued by the Plan and Budget Organization “as per the 2020-21 budget bill revolutionary bodies that also have economic and commercial activities must pay 15 trillion rials ($115 million) in taxes,” IRNA reported.

It named the Bonyad Mostazafan and the Setad Ejrai Farman Imam Khomeini (Execution of the Order of Imam Khomeini) as two such bodies that will have to pay tax next year.

The PBO also named conglomerates affiliated to the Astan Qods Razavi that must pay their share of tax despite the fact that these are identified as Waqfs (endowments) and not subject to taxation, according to Financial Tribune.

According to the national budget institution the AQR “should pay tax to the treasury and the amount that is paid will be used for anti-poverty programs”.

AQR is the organization that manages the mausoleum of Imam Reza (PBUH), the Eighth Imam of the Shiites.

The shrine, in Mashad, Khorasan Razavi Province, is Iran’s most important pilgrimage site visited by tens of millions of people from in and outside Iran every year.

One of the Largest

As one of the largest socio-economic conglomerates, the AQR owns hundreds of companies involved in construction, industries, mines, agriculture, dairy, pharmaceuticals, insurance, carpets, timber, healthcare, publishing and more.

Given the expanding budget deficits of the government in the past years, the Rouhani administration has come under mounting pressure to collect taxes from every and all entities involved in commerce in any form or shape.

Almost all revolutionary bodies, many of which are also involved in commerce, have been tax-free after the revolution in 1979. The issue of taxing the huge and powerful organizations has come up at regular inverters in successive governments, apparently without the desired results.

Head of the Iranian National Tax Administration said last month that an estimated “50% of economic participants in the country do not pay tax.”

“Tax revenues account for about 85% of government spending in some countries, whereas in Iran, this barely reaches 50%,” Omid Ali Parsa said.

In Plain View

With the new US oil sanctions having cut Iran’s crude oil export to a significant extent, it is now in plain view that the controversial polices of the past, which exempted a long list of state organizations from paying tax, are coming to an end.

Under the difficult circumstances, academia, experts and economic analysts have demanded that the extended tax holidays and tax-breaks end once and for all.

They also have called for stringent rules against tax evasion – a pattern that has worsened over the years as many companies and professions (physicians, lawyers, film industry…) do all they can not to pay tax.

With diminishing oil export revenues, the government has made known that the affairs of 80 million people “should be managed with tax money.”

Observers of different stripes point out that this government policy has come at an odd time and is “too late too little.”

The argument is built on the understandable premise that many SMEs and retail outlets are under pressure as the purchasing power fades along with the value of the national currency and companies are closing down because of declining sales and mounting losses.