Tehran Province Accounts for 56% of Iran’s Tax Revenues

EghtesadOnline: Tehran Province is expected to earn 1,000 trillion rials ($4.47 billion) of the total 1,800 trillion rials ($8.05 billion) of tax revenues projected for the current fiscal year (March 2020-21), says Mohammad Reza Nouri, the head of Tehran Tax Office.

News ID: ۷۵۰۷۰۰

15 August 2020

“By materializing 106% of tax revenues set in the last fiscal year’s budget, Tehran Province accounted for 56% of the country’s total tax income of 1,410 trillion rials [$6.3 billion], i.e. 800 trillion rials [$3.57 billion]. This is while taxpayers were grappling with the coronavirus crisis and sanctions,” he was quoted as saying by IRNA.

Tax rates will increase by 28% on average in the current fiscal year (March 2019-20), the head of Iran's National Tax Administration, Omid Ali Parsa, said recently.

"In underprivileged provinces, the rate will be lower. For instance, Lorestan and Ilam will see 15% growth. However, taxes in Tehran will rise 32%," he was quoted as saying by IRNA on Thursday in a meeting with business owners in the southern Kerman Province.

"The taxation system is moving toward imposing heaviest rates on higher income deciles while minimizing levels for those with modest means," he added.

Noting that 95% of the budget go to fund civil development projects, the INTA chief said Tehran will account for 55% of the country's overall tax income in the current fiscal year.

In comparison, Kerman will account for 3.2%, he added.

Parsa said INTA earns more than 120 trillion rials (about $537 million) in tax revenues (direct and indirect) on a monthly basis.

This is while the government's general spending is at 280 trillion rials ($1.25 billion) per month.

"About 8% of Iranians' income is put at the disposal of the government [in the form of tax]. The global average is at 30%. At a time when oil revenues have declined, the government has no choice but to count on tax revenues," he added.

The Sixth Five-Year Development Plan (2017-22) targets an 8% share of tax revenues from GDP by March 2022. The figure currently stands at 6%. At present, revenues gained from tax are at least 1 quadrillion rials ($4.47 billion) behind the goals of the development plan, Fars News Agency reported.

Iran’s development plans outline government strategies in its budget planning for the next five years.

Experts say the reason for this disproportion in tax revenues’ share in the country’s GDP is that some 50% of the Iranian economy enjoy tax exemption. This is to be topped by rampant tax evasion and faulty taxing methods.

According to Parsa, 40% of Iran’s economic players are exempt from paying taxes.

Besides tax exemption, the government budget in Iran also suffers from widespread tax evasion.

Gholamali Jafarzadeh Imenabadi, a member of Majlis Plan and Budget Commission, has put the size of tax evasion at 400,000 billion rials ($1.78 billion) annually.

He has been quoted as saying that the value of tax exemption and tax evasion together is more than 1,000 trillion rials ($4.47 billion).

Independent observers put the figure at much higher rates.

Amid financial constraint, the government is counting on tax as a major source of revenue. New forms of tax have been introduced to curb the widening deficit inflicting the government budget.

According to Parsa, tax revenues’ share in budget increased from 37% in the fiscal 2018-19 to 54% last fiscal year, Mehr News Agency reported.

“The average growth in tax revenues over the past five years was 21%,” he was quoted as saying.

He added that value added tax gains hit 250 trillion rials ($1.11 billion).

Parsa noted that once the parliament gives its full consent, luxury homes and pricy cars will be subject to wealth tax.