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Half Of Iran's High-Income Earners Do Not Pay Tax

In this Sept. 17, 2018 file photo, imported cars are displayed at a showroom in Tehran, Iran. With high customs duties, these luxury cars cost 2-3 times more in Iran than in most other countries.

The head of Iran’s Tax Organization has said existing information from banks indicates that half of the country’s high-income tax subjects do not pay taxes, according to the government news website IRNA.

Omid Ali Parsa reiterated that information from banks obtained by his office show about half of 300,000 people or entities with incomes exceeding 10 billion rials or about $900,000 were exempt from taxes and the other half paid less than the required amount.

Tax exemption granted to many large enterprises is a controversial issue in the Islamic Republic. All institutions, religious foundations and organizations under the direct supervision of Supreme Leader Ali Khamenei are exempt from taxes. Some of these are nominally charitable organizations but in reality they function as large business enterprises.

Parsa said that in the current fiscal year share of taxes in the budget is around $13 billion (based on free market exchange rate). This represents only 8 percent of total incomes in the country.

As U.S. sanctions have mostly stopped Iran’s oil exports, which is a major source of income for the state, and limited its non-oil trade, the government needs to rely more on tax income. President Hassan Rouhani’s government has lately began raising the issue of tax collection, as government operations face serious cash-flow problems.

It is difficult to precisely estimate numbers related to incomes, taxes and other economic activities in Iran due to lack of transparency. Various state entities and officials mention significantly different numbers when presenting economic data.

Various officials have estimated tax evasion to be between $4-7 billion annually, which during years of abundant oil income might not be too disruptive for government finances, but this year it would constitute a significant amount.