Data published by the Central Securities Depository of Iran show income plummeted almost 65% to 45.72 trillion rials ($163 million), almost a third of the amount a year ago.
Taxes on share transactions in the first nine months of last fiscal year reached 134.12 trillion rials ($479m) thanks to the unprecedented stock market boom, particularly in the first half of the year when millions of new investors rushed to the bourse.
Known as financial transaction tax (FTT), tax on stocks is levied on buying and selling a stock, bond, or other financial contracts like options and derivatives.
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”. Tax on stocks falls under the wealth tax category.
Tax revenue from stock market activities is different from capital gains tax commonly levied on share profit. In recent times the government has denied that it intends to levy capital gains tax on share profit.
The tax on shares is 0.5% of the total value of the trade. Given the deep decline in the share market for over 18 months, the tax rate is not expected to increase anytime soon because it would harm investment in shares and further harem the market struggling to survive under the difficult economic climate.
Steep decline in taxes from the share market is linked to investors’ aversion to participate in the stressed market following the historic collapse in the summer of 2020.
Data released by the Securities and Exchange Organization indicate that market has taken a major drubbing. A review of market data for the month ending Dec.21 show average daily trade by retail investors stood at 20.38 trillion rials ($72m), down 85% on the corresponding month last year.
The government’s projected income from tax on share trade has been cut by a massive 40% in the March 2022-23 budget.
Tax on share trade understandably declines if trade value is low and when traders stay away for whatever reasons. As such, the government has forecast less income from stock trade next year.
Numbers seen in the next budget show the government expects to earn 104.2 trillion rials ($372m) from tax on stocks, the amount is 171.2 trillion rials ($611m) in the budget for this year.
The government has recently decided to invest tax revenue from shares again in the share market in the framework of its declared policy to revive the bearish market.