Windfall Taxation on Gold Coin, Forex Trading

EghtesadOnline: Government is to levy taxes on gold coin and foreign currency buyers who benefited from windfall profits amid the recent volatility in the two markets, the economy minister announced on Monday.

News ID: ۷۸۳۲۹۳

18 July 2018

Masoud Karbasian, who announced the news on his Instagram page, said the move is in line with recent developments and President Hassan Rouhani’s order to promote transparency.

The recent volatility in the foreign exchange and gold coin markets was accompanied by a series of revelations about widespread rent-seeking and abuse by recipients of cheap currency who made astronomical profits in these markets.

Earlier this month, Tehran Police Chief Brigadier General Hossein Rahimi told reporters that his forces tracked down a person who had bought two tons of gold coins through the Central Bank of Iran’s presale scheme that offered gold coins at attractive prices, Financial Tribune reported.

Rahimi said on Monday the police detained the person known as the “Coin Sultan” and his son, as well as 18 minions.

The news of quick gains in the gold and forex markets led to an outcry from the public who have seen their savings shrink by more than 50% in the wake of the government’s failure to rein in the rial’s steep depreciation against major currencies.

Leader Ayatollah Seyyed Ali Khamenei called on President Rouhani’s Cabinet members on Sunday to deal with wrongdoers in gold and forex markets.

CBI’s gold coin auctions and presale scheme, which were intended to calm the bullish market, fell short as the gold coin continues to retain its bubble and critics argue the government only lost huge gold reserves in the bargain.

“Iranian National Tax Administration has identified the major buyers of gold coin and as per the law they are obliged to pay ‘windfall tax’,” Karbasian was quoted as saying by IBENA.

He added that the top 100 people on the list of biggest gold coin buyers will be prioritized in the investigation on windfall profits.

The minister added that car importers who have received cheap currency but sold their products at open market rates will also be taxed on the difference when they declare them and in the case of failing to do so, they will treated as tax evaders.

Judiciary Spokesman Gholamhossein Mohseni Ejei said on Sunday that special prosecutors would swiftly deal with economic crimes, including profiteering from foreign exchange and gold dealings, the illegal import of luxury cars and price gouging on imported goods such as mobile phones.

The government decided to unify the US dollar’s exchange rate at 42,000 rials on April 9 after the rial sink to all-time lows against the greenback.

However, as the rate was significantly lower than in the unofficial market, competition began among well-connected importers to receive more of the cheap currency.

In response, the government resorted to a multi-tier scheme based on which importers received foreign currency at different rates, with the least important class of imported goods, which the government deemed “luxurious”, facing an import ban.

The initiative to promote transparency gained momentum after CBI, at the behest of President Hassan Rouhani, published the full list of companies that benefited from foreign exchange for their imports at the preferential rate.

Earlier, Information and Communications Technology Minister Mohammad Javad Azari-Jahromi disclosed the list of handset and mobile device importers who had received their foreign exchange at the official rate.

A glance at the list makes it clear that some major companies, which had received cheap currency, sold their goods at open market rates or kept the hard currency for themselves without undertaking any import.

After the controversial import of some 5,000 luxury cars when the import window was closed last year, President Hassan Rouhani issued a separate order on Saturday asking his Cabinet and the judiciary to wrap up the issue within 15 days.

On Monday, the benchmark Bahar Azadi gold coin lost 1.73% and was traded for 27.70 million rials ($644 at the official exchange rate). Reports from Tehran’s unofficial market also suggested that the US dollar’s exchange rate was also hovering around 80,000 rials.