October 14, 2022
The government has been boasting that it has finally reduced the scale of oil revenues used to fund the government, but a leading economist says it has done so by imposing taxes on many more people without providing any services.
For decades, even before the revolution, it has been a major hope of Iranian governments to be able to reduce the dependence on oil for funding day-to-day government activities and to reserve oil revenues chiefly for economic development programs.
In the last decade, the government has been able to reduce the dependence on oil but that is because US sanctions have reduced oil revenues so much. The result is that there isn’t much oil revenue to devote to economic development or to run day-to-day government operations.
To try to close the revenue gap, the government is tapping new sources for taxes. In the first five months of the current Persian year, taxes accounted for 49 percent of all government revenues, according to the Economics Ministry. Tax revenues rose by an astounding 73 percent compared with the same period last year.
At first blush, this looks like the Raisi Administration has finally achieved the goal that has been pursued for more than three-quarters of a century. But Morteza Afqeh, an economist and university professor, wrote in the daily Ta’adol that this achievement is harmful.
“The fact is that if the government fails to solve the budget deficit through the nuclear negotiations and oil revenues, it must look for other ways to offset the deficit. Since it does not have the expertise and technical ability to increase production and exports, it must constantly search people’s pockets and public accounts, and make decisions based on which people should be forced to pay more,” Afqeh wrote.
“The economic team of the government pores over the laws of advanced Western European countries in search of new tax bases, regardless of the fact that these countries collect taxes in exchange for providing services. Basically, taxes should be determined vis-a-vis services extended by the government. What does this amount of tax collection mean when the country’s roads are in such a bad condition, Iranian planes are decades old and there are no decent leisure activities? These taxes have been introduced in an economy hit by sanctions and mismanagement.
“The government only cares about taxing people while it fails to improve productivity at public offices note that a large number of economic and industrial organizations are exempt from paying tax [chiefly those linked to clerical organizations], which amounts to meting out injustice to the people. An example of this new form of taxation is the violation of people’s rights but, unfortunately, the authorities do not pay attention to the fact that poverty is the end result of these types of taxes. “Too much taxation hurts small businesses and increases unemployment. When faced with such government decisions, people have no choice but to migrate to other countries, or turn to non-transparent middleman-ship. All these hit the economy hard. But sadly, it seems the government has turned a deaf ear to the warnings of economic players,” Afqeh wrote.
