Which factors should Iran take into account in budget planning?

Tehran, Iran, Jan.3


Iran's upcoming budget plan, which is still waiting for approval is based on oil and gas export revenues despite the US sanctions and the consistent low prices at the global market, economic professor at the University of Tehran Teymur Rahmani told Trend.

However, he believes that predicting high income from oil exports is not logical and the budget plan for the next Iranian year (starts March 21, 2019) should not depend on it.

“The government should not depend on revenues of oil and gas condensate exports and must be cautious over the issue in the budget bill. It seems the expected number of oil and gas sale is not even close to the reality of Iran exports, however the government has indicated rise of income from oil exports revenues in its budget," said Rahmani.

The expert noted that the government is still dependent to these two resources.

Talking about the effects of $663 million rise of the income tax on the economy while the country suffers from negative growth rate, he noted that the issue would not create problems in economy, since these figures are nominal tax and not real. Naturally when there is an economic inflation the rise of taxes would not mean the rise of taxes for every productive unit, he explained.

Since the government predicted the VAT would bring $923 million income, but some believe, rise of income tax next year would pressure the producers.

"Various factors in tax system should be considered. For example, we can witness tax evasion and non-transparent trade by some productive and financial units, therefore it cannot be said that 22 percent rise of tax would pressure producers," he added.

Rahmani noted that the government would better take into account the effect of US sanctions when making the budget plan.

"The sanctions are very important. It is natural that under the sanctions the country has some limits and exports ban, which will lead to a decrease in its revenues. The concern is that the government did not take into account this pessimistic view on budget plan. If the oil price falls in the international market, even though Iran's volume of exports remains the same, the government's income would be less than predicted. Therefore, I believe the government should be cautious about oil income expectations. The fluctuation of USD rate would also effect the income in future." he said.

Responding to government concerns over the oil export revenues and its effect on budget, the expert said the government has predicted daily exports at 1.5 million barrels of oil and 135,000 barrels of gas condensate. "Some say oil dependency in this budget would be 35 percent which is not logical and the real share is more than this."

The next Iranian year (start on March 21, 2019) budget bill has predicted $758 million increase in the oil and gas condensate income, while the predicted tax revenues would add $663 million to country's budget.

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