Share of Oil in Iran's General Revenues Falls From 46% to 34% in 6 Yrs.

EghtesadOnline: The share of oil revenues in the government’s general revenues reduced from 46% six years ago (March 2012-13) to 34% last year (March 2016-17), Minister of Economic Affairs and Finance Masoud Karbasian said.

News ID: ۷۸۲۰۵۰

14 March 2018

This has been made possible mainly as a result of increased tax revenues. President Hassan Rouhani’s economic strategy to reduce the dependency of the country’s finances on oil revenues has proved effective, as it is two years now the government is earning more through taxes than oil sales.

Chairman of Iranian National Tax Administration Kamel Taqavi-Nejad recently said the government earned 150% more from tax than from oil in the last fiscal year (March 2016-17).

Iran collected taxes worth 1014.7 trillion rials ($22.5 billion) in the last fiscal year (March 2016-17), registering a rise of 28.1% compared with the year before, while it made 738.8 trillion rials ($16.41 billion) by selling oil and petroleum products, Financial Tribune reported.

Speaking during the 11th Conference on Tax and Fiscal Policies 2018 on Wednesday at Faculty of Economics, Tehran University, Karbasian said the tax-GDP ratio improved to 8% in the last fiscal year (March 2016-17) compared with 4.5% in the fiscal 2012-13

"The share of taxation in government revenues is still far from ideal despite improvements," said the minister, adding that tax-GDP ratio hovers around 20% in developing countries.

According to a report published by Shada, the official news outlet of the Ministry of Economic Affairs and Finance, tax to gross domestic product ratio stood at 5.4% over the years during 2005-12 while it averaged out at 6.6% during 2013-14 and 2016-17.

Iranian economist Saeed Leylaz believes tax revenues would become a dependable source of income for the country, if they increase to 12% of gross domestic product in three to four years to reach 1,500 to 2,000 trillion rials ($30-40 billion) per annum.

“The incumbent government or future governments need to earn their revenues through taxation and that’s possible by eliminating tax exemptions and employing tax technology,” he said.

“Oil exports are unlikely to generate additional revenues in the next 10 years, regardless of the extent of price volatility. Compulsory expenditures will exhaust the sum realized from oil sales.”

Tax revenues made up around 36% of the government’s total general revenues in the first 10 months of the current Iranian year (March 21, 2017-Jan. 20) compared with 44% in the same period of last year and the average 28% between the fiscal 2005-6 and 2012-13, the ministry's report added.

A look at the composition of tax revenues shows that the share of goods and services tax from overall revenues increased to 39% in the 10 months under review from 36% in the same period of last year.

The share of tax revenues from legal entities dropped to 28% from 33% while the share of income tax slipped 1% to reach 15% this year. The proportion of revenues gained out of wealth tax remained unchanged over the past two years at 3% of the total tax income.

Leylaz believes the best starting point for structural reform in the economy is by removing tax exemptions.

According to Chairman of Majlis Economic Commission Mohammad Reza Pour-Ebrahimi, a total of 70 trillion rials ($1.5 billion) were earned during the first eight months of the current fiscal year (started March 21, 2017) from newly identified economic operators.

Noting that tax evasion stands at 30-40% of total tax revenues in Iran annually, Pour-Ebrahimi said tax evasion costs the country an estimated 400 trillion rials (about $8.7 billion) every year.