According to Mohammad Masihi, the deputy head of the Iranian National Tax Administration, the government earned 107% of the projected budgetary income from taxation in the last fiscal year (March 2020-21).
The government’s tax revenues consist of returns from “direct taxation” and “tax on goods and services”. Direct taxes include three groups of “tax on legal entities”, “income tax” and “wealth tax”.
Masihi said direct tax earnings stood at 1,190 trillion rials ($4.71 billion) in the year ending March 20, to account for 136% of the projected income in the budget law and 46% more than direct tax revenues of the preceding year (March 2019-20).
“Tax on goods and services generated 735 trillion rials [$2.91 billion] for the government, accounting for 80% of the expected budgetary figure and 23% more than the corresponding revenues in the previous fiscal year,” he was quoted as saying by Fars News Agency.
Referring to the sub-sections of direct tax revenues, the official said, taxation of legal entities generated 560 trillion rials ($2.21 billion) during the period under review, indicating a 27% growth year-on-year and 395 trillion rials ($1.56 billion) in income tax were collected as well, registering a 36% year-on-year rise.
Last fiscal year’s wealth tax income stood at 232 trillion rials ($918.81 million), showing a 178% increase compared with the year before.
The official blamed the coronavirus pandemic and decline in transportation and fuel consumption for a 14% decline in petroleum products tax revenues and said INTA collected 60 trillion rials ($237.62 million) from taxation of petroleum products last year.
“Self-declaration of tax returns accounted for 70% of the country’s tax revenues, which allowed INTA to focus on improving tax collection from major taxable persons. INTA also managed to collect 100 trillion rials [$400 million] from overdue tax returns,” Omid Ali Parsa, the head of the Iranian National Tax Administration, was quoted as saying by Mehr News Agency recently.
Noting that tax evasion accounts for an estimated 400-450 trillion rials ($1.6-1.8 billion), the official said, “Up to 40,000 bank accounts with transactions of more than 50 billion rials [$200,000] per year will be investigated technically and professionally to prevent tax evasion.”
New Tax Bases
Finding new tax bases is one of the parliament’s key tools to tackle budget deficit in the current fiscal year (started March 21).
Taxing cars worth more than 10 billion rials ($4,000), houses worth more than 100 billion rials ($400,236), tax on the income of influencers in social media with more than 500,000 followers and celebrities who earn upwards of 2,000 million rials ($8,000) annually are the latest decisions made by lawmakers regarding taxation.
According to a decision by the Majlis Joint Commission—a parliamentary body responsible for reviewing the budget bill as well as the five-year economic development plans—a step-wise approach must be applied for calculating this year’s income tax. In doing so, salaries below 40 million rials ($160) per month are exempt from tax, incomes between 40 million rials and 320 million rials ($1,280) will be taxed at different rates of up to 30% and those earning over 320 million will be subject to a 35% income tax rate.
Heads of households, whether homeowner or renter, are required to register their properties online.
According to Deputy Minister of Roads and Urban Development Mahmoud Mahmoudzadeh, households who own more than two residential properties (one in the city or village of their permanent residency and the other in the city or village where their second home is located) will be subject to vacancy tax if they have been unoccupied for more than 120 days.
“Vacancy tax for real entities will be six times more than the value of the rent of the property in the first year, 12 times more than the value of the rent of the property in the second year, and 18 times more than the value of the rent of the property in the third year. For legal entities, vacancy tax has been set at 12 times more than the value of the rent of the property in the first year, 24 times more than the value of the rent of the property in the second year, and 36 times more than the value of the rent of the property in the third year,” Mahmoudzadeh was quoted as saying by IRNA on March 29.
This comes as Mehr News Agency quoted Omid Ali Parsa, the head of the Iranian National Tax Administration, as saying on March 23: “The first vacancy tax will be levied in the Iranian month starting July 23 and it will be half the value of the monthly rent of the property.”
A total of 1.3 million empty homes that are subject to vacancy tax were made known to INTA during the Iranian year ending March 20, Minister of Roads and Urban Development Mohammad Eslami said.
“According to a report by the Association of Realtors, measures taken by the ministry resulted in a 25% decline in home prices in the fourth quarter of last year [Dec. 21, 2020-March 20],” he added.