Financial transaction tax (FTT), a tax on buying and selling a stock, bond, or other financial contract like options and derivatives, has grown remarkably accounting for 12% of the total, according to a report by the Tehran Chamber of Commerce, Industries, Mines, and Agriculture (TCCIM).
Tax earning from stock trade recorded a whopping 880% growth in H1 compared to the corresponding period last year when it was 10.17 trillion rials ($41m), according to eghtesadonline.
The unusual growth is due to the steep increase in the number of deals and trade value largely due to the deluge of new investors.
Income from taxing stock trade was 443% higher than projections in the fiscal March 2020-2021 budget, according to TCCIM.
More than 486 billion shares worth 1,445.6 trillion rials changed hands at Tehran Stock Exchange during H1, which was up 882% in value and 124% in volume compared to the same period a year ago.
As per INTA data, the government earned 852.23 trillion rials ($3.09 billion) in tax revenue in the first half of the current fiscal year.
Government tax revenues consist of direct taxation and goods and services tax. Direct tax includes tax on legal entities, income tax and wealth tax.
Overall direct tax stood at 549.55 trillion rials ($1.9b), of which tax on legal entities was 227.49 trillion rials ($827.23m).
Revenue from income tax reached 192.65 trillion rials ($700.5m) and wealth tax revenue topped 129.4 trillion rials ($470.54m). Tax on stock trade falls under the wealth tax category.
Tax revenue from stock market activities is different from capital gains tax that is commonly levied on share profit. The government on multiple occasions has denied the likelihood of levying capital gains tax on share profit.
While tax earnings from stock gains could potentially be a reliable source of income for the government struggling with deep budget deficits, there are fears that this type of tax can push investors to step back from the bourse and explore other markets.