In early June, during a speech to introduce the new head of Iran’s Tax Organization, Iran’s President Hassan Rouhani hinted at wanting to “spread a tax culture” instead of relying on oil revenue.
Subsequently on June 8, Iran’s Minister of Economy said that Iran was in a transitional phase of shifting from oil reliance to revenue reliance.
Iran’s taxing policy feeds the corrupt regime unlike democracies that use the money for public welfare and public facilities and to better the lives of their citizens.
Rouhani claimed in his speech that if taxes were raised, his government would be able to increase production, though how he plans to carry out this implausible feat to save Iran’s crumbling economy is unknown.
Iran’s decaying domestic production
Government corruption is rampant in the Islamic Republic of Iran and like all corrupt systems, it is not clear where the tax revenues go.
For example, according to Mohammad Qasem Panahi, the head of the Tax Organization, the government received 113,000 billion tomans in taxes in 2018.
However, it never became clear how much of this money was used for production, alleviating poverty, or reducing budget revenues instead of oil.
The regime refuses to be held accountable for its spending practices.
The fact is, despite the 113,000 billion in taxes, poverty has increased in Iran wiping out Iran’s middle class while domestic production has crumbled.
Despite Rouhani’s claim of increasing domestic production, thousands of small and large manufacturers have closed down and gone bankrupt in the past year.
According to Abdolreza Mesri, an MP who is now deputy Majlis speaker, “60% of Iran’s industrial factories have closed down”.
It is worth noting that top regime officials are exempt from taxes along with large regime institutions.
The highest taxpayers in Iran are workers, government and private employees and ordinary Iranians.
Iranian state media recently published a list of mostly religious institutions that are exempt from taxes and are largely controlled by Iran’s Supreme Leader, Ali Khamenei.
According to the November 2018 announcement by the Tax Organization, the Mostazafan Foundation, the Imam Khomeini Order (known as Setad), the Martyrs and Veterans Affairs Foundation (Bonyade Shahid), the Imam Khomeini Relief Foundation (Komiteye Imdad) , the Islamic Propagation Organization, the Islamic Propagation Office of the Qom Seminary, the Bonyad Maskan of the Islamic Revolution (Housing Foundation), the Seminary Services Center, the Islamic Revolution Culture Research Institute, and The Al-Mustafa International University in Qom are exempted from taxes.