Iran’s private enterprises suffering under mounting tax pressure

Iran’s private enterprises suffering under mounting tax pressure
/ bne IntelliNews
By bne IntelliNews November 10, 2023

Private businesses in Iran are fretting over the government's drive to boost its tax income.

Tax is the second biggest source of income in the Iranian fiscal budget after oil. Amid overestimation in oil sales, the government is counting on tax to cover its increasing spendings. Indeed, official figures show the share of tax in the operating budget has been on the rise in recent years.

“It seems that the government intends to finance all the expenses of the country's executive apparatus through taxation. This implies that tax pressures on various economic sectors, especially the private sector, will increase,” said Mohammadreza Torkalizadeh, a member of Iran Chamber of Commerce board of representatives.

Noting that funding all the expenses of the executive apparatus through taxation will impose significant and overwhelming pressures on the private sector, he said this will act as a major obstacle to economic growth, the chamber’s website reported earlier in November.

The Iranian National Tax Administration’s (INTA) has reported a 51% increase in the government’s tax revenues in the current fiscal year. Meanwhile, in a new measure all sales outlets have been required to pay fees on the goods and services they sell to their customers. 

Referring to the shortcomings in Iran’s taxation system, the official said that in most countries around the world, tax instruments are used in a way that acts as an incentive for investment, adding that developed economies have various taxation methods to encourage new investments. “Unfortunately, this form of progressive taxation has been overlooked in our country.”

Noting that the primary demand of economic actors in the private sector is “tax fairness,” Torkalizadeh called on the taxman to consider trapping major evaders. 

“Although taxation is considered one of the stable sources of government revenue, and the private sector considers itself committed to fulfilling its obligations in this area, the concern here is that the scope of tax collection should not be limited to transparent sectors and documented economic entities. It should encompass profit-seeking domains that are evading their commitments and government payments,” he concluded.