Tax revenues may compensate for decrease in Iran’s oil revenues in long-term

Tehran, Iran, Nov. 19

By Temkin Jafarov, Milad Fashtami - Trend:

Mehrdad Emadi, an economic analyst, told Trend Agency on Nov. 19 that in the short-term, tax revenues cannot compensate for the budget deficit that Iran is expected to face due to a decrease in oil revenues.

"Iran's economic growth has become positive but still the private sector is struggling with all-out recession," he explained.

"In order to increase tax revenues, the government has to put tax on either salaries and personal incomes or the company's profits," Emadi said, adding that this may be possible in medium-term.

He went on to note that Iran is one of the top countries in the region and even the world with the highest rate of tax evasion.

"According to Iran's Majlis (parliament), some 85 percent of the companies do not pay tax to the government," he said.

"If the companies pay their actual taxes, Iran's annual tax revenues would reach $4 billion. And if individuals also pay their actual taxes, another one billion dollars would be added to the mentioned figure," Emadi noted.

"The figure is significant in itself, but still cannot be compared to the country's oil revenues. So paying all the expenses of the government by tax revenues is not possible in the short-term or even medium-term, but it may be possible in the long-term," he analyst said.

"In order to decrease the country's dependence on oil revenues, Iran should put tax on people's wealth instead of incomes," he said, adding that Iran's tax on inheritance is much lower than the average of European countries and could be raised up to three-fold.

"By doing so Iran may be able to increase its tax revenues by several times," he added.

Iran is expected to face a budget deficit in the current Iranian calendar year (to end March 20, 2015), due to the sharp fall in oil prices.

Iran's current year budget envisages the price of $100 per barrel of oil, while each Iranian oil barrel is currently sold at around $80.

Based on Iran's budget law, the country is supposed to export 1.4 million barrels of oil (including gas condensate) per day.

Reports suggest that the country is daily earning $18-20 million less than the projected figure, so if the current trend continues the total budget deficit may soar above $2.5 billion.

Iranian President Hassan Rouhani has also predicted that Iran's total oil revenues will be 30 percent less than expected.

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