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EghtesadOnline: A customs administration directive to raise import taxes met with fierce criticism from the Iran Chamber of Commerce, Industries, Mines and Agriculture on Monday. The controversial decision is likely to spark debate about tax evasion and trade regulations.

The Islamic Republic of Iran Customs Administration has slapped a four percent tax on imported goods upfront. This means a commercial card holder, whose card was used for importing goods, will be charged four percent on the total value of the imports. IRICA announced its decision to raise the rate by two percentage points on Monday. It is charging the preliminary tax to counter tax fraud, and increase government revenues, IRNA reported.

An IRICA statement said “profiteers” have rented commercial cards and doctored records to avoid paying taxes leading to a “loss of revenues for the government and the nation”.

Registered manufacturing units importing machinery, gold commercial card holders, IRICA approved importers, state agencies funded by the government budget, radar and arms imports, and goods imported by international agencies or foreign consulates are exempt from paying the four percent fee, the law stipulates. Renting out commercial cards to others is a felony in Iran’s commercial law, the Ministry of Industries, Mining and Trade had previously announced.

 Backlash From the Chamber

Members of the Iran Chamber of Commerce, Industries, Mines and Agriculture were quick to condemn the decision.

The statement was criticized by Mozafar Alikhani, technical deputy at ICCIMA. He said the new levy will raise the price of imported goods, thereby increasing inflation, and create a drag on household finances. Alikhani cited the dire condition of manufacturers and importers, and said the move could deepen cash flow shortages, according to Financial Tribune.

He also said that the tax hike would complicate business process and was against a law passed specially to protect and promote local manufactures. “The new tax is supposed to stop tax evasion. Tax evaders are few compared to the law-abiding businesses who pay their taxes on time. Thus, it is illogical to add pressure on the decent majority for the sake of wanting to tame the minority,” IRNA quoted Alikhani as saying.

The chamber’s vice president, Pedram Soltani, asked Economy Minister Ali Tayyebnia to revoke the tax hike in an open letter sent on behalf of private enterprise. He wrote that the law already had measures to counter tax evasion with borrowed commercial cards.

Soltani added two more downsides to those cited by his colleague about the tax hike. The tax hike will “raise the cost of legal imports and thus encourage smuggling.” Furthermore, he said the customs directive is opaque and its misinterpretation will eventually increase rackets in the bureaucracy.

Iran's import taxes Iran's imports Iran Chamber of Commerce tax evasion Iran Customs