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EghtesadOnline: Self-declaration of tax by guilds accounts for 70% of the government’s tax revenues, a deputy head of Iranian National Tax Administration said, adding that plans are to increase the figure to 90% in two years.

“Generating tax income through self-declaration is a significant achievement, which frees up energy for combating tax evasion. Economic operators who fail to submit their tax returns on time will be disqualified for receiving tax breaks and exemptions,” Mohammad Masihi was quoted as saying by IRNA.

Noting that the government will support businesses hurt by the coronavirus outbreak, the official said, “Tax will be imposed in accordance with their income and businesses that suffered enormous losses or were closed down due to the virus will be subject to tax forgiveness.” 

Latest data show the government earned upwards of 1,314 trillion rials ($5.05 billion) in tax revenues in the eight months to Nov. 20, which account for 64% of the sum predicted in the budget for the period.

The government’s tax revenues consist of its returns from tax on legal entities, income tax, wealth tax, tax on imports and tax on goods and services. 

Earnings from taxing companies and legal entities stood at 347.53 trillion rials ($1.33 billion), which account for 78% of the sum projected in the budget for the period under review. 

The Iranian National Tax Administration earned 257.75 trillion rials ($991.34 million) from taxing civil servants and workers (income tax), which constitutes 74% of budget’s projected figure. 

Wealth tax revenues stood at 157.68 trillion rials ($606.46 million) over the period, indicating a 186% realization rate. Wealth tax recorded the highest growth over the period, thanks to tax on stock trading. 

Tax on imports earned the government 95 trillion rials ($365.38 million). Earnings from tax on imports constitute 39% of the projected budgetary requirements. The small realization rates are due to the decline in imports over the period.

And finally, tax on goods and services, which also includes value added tax earnings, hovered around 455.96 trillion rials ($1.75 billion), indicating 49% of the projected figure in the eight-month budget. 

Total tax earnings as per the fiscal 2021-22 budget bill have been set at 2,515 trillion rials ($9.67 billion), including 591 trillion rials ($2.27 billion) from tax on legal entities, 491 trillion rials ($1.88 billion) from income tax, 238 trillion rials ($915 million) from wealth tax, 235 trillion rials ($903 million) from tax on imports and 957 trillion rials ($3.68 billion) from tax on goods and services. 

 

 

Reforms

INTA has pursued a variety of reforms in rules and regulations, and sought to provide infrastructures needed to carry out a major modernization of the taxation system including:

Tax incentives were introduced for new companies willing to list on the stock market in the current fiscal year (March 2020-21). The proposal was floated by the Economy Ministry at the High Council of Economic Coordination, an ad hoc economic decision-making body comprising heads of three branches of power, and approved therein. 

INTA will grant tax waivers to companies wanting to go public. Potential listed companies will be accountable only for tax liabilities in the previous fiscal year (March 2019-20) and INTA will not delve into prior tax records.

The tax agency made starting a business easier by removing 15 requirements and unnecessary regulations, and consequently accelerating starting business procedures by 53 days. 

The Iranian Deeds and Properties Registration Organization was tasked with electronically putting all the information it needs to issue tax file numbers, also known as Economic Code in Iran, for real entities at the disposal of INTA. 

Prior to this new measure, there were 45 stages to register for tax file numbers, of which 44 could be completed in less than half an hour but the last stage, the authentication process, would take days and consequently hurt ease of doing business. In addition, business entities don’t need to secure the value added tax registration permit.

Putting together the bill on Direct Tax Code Overhaul and sending it to the government for approval in the month ending Feb. 19, 2020, was another significant measure taken by INTA in the last fiscal year. 

The bill includes new types of tax, namely the individual income tax or personal income tax levied on wages, dividends, interest and other sources of income a person earns throughout the year, capital gains tax for residential property, vacancy tax; tax on luxury cars, etc. Amendments on tax exemptions and incentives have been envisioned in the proposal as well.  

Taking measures regarding business owners' transactions processed through point-of-sale devices to improve transparency, drafting the roadmap for modernizing the taxation system, including completing E-Tax and designing I-Tax systems, offering electronic services related to tax return filing, tax statements, registration of taxpayers and their electronic payments through smartphones, and reducing in-person communication between taxpayers and tax officers were other steps taken by INTA last year. 

Outsourcing the execution of property transfer tax to notary public offices and delegating the authority to carry out tax forgiveness, determining payment of tax liabilities in installments and value added tax law to directors general of tax affairs across the country in order to shore up production, treat clients with respect and promote decentralization were among significant measures undertaken by the tax administration over the past year.

 

Iran Tax Revenues