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Parliament Moves To Tax Khamenei’s Profitable Charities

President Hassan Rouhani submits the budget bill to Speaker of Parliament Ali Larijani, December 25, 2018.

Iran’s parliament has passed legislation requiring charitable organizations under the control of the Supreme Leader and other state entities engaging in commercial activities to pay taxes.

As the Iranian economy has deteriorated in recent years the issue of taxing religious-charitable organizations, the all-powerful Islamic Revolution Guard Corps and other tax-exempt organizations has been pushed to the forefront.

While President Hassan Rouhani's government advocates taxation, the religious and military leadership backed by the Supreme Leader resist paying taxes.

The organizations named in the law include Astan Qods Razavi (AQR), a massive charity based in the city of Mashhad, the commercial activities of the armed forces, and the Headquarters of the Imam's Decree (known as “Setad” for short), a charity started by the founder of the Islamic Republic, Ayatollah Ruhollah Khomeini, which a Reuters investigation said“built its empire on the systematic seizure of thousands of properties belonging to ordinary Iranians.”

Before the law can take effect, it must be approved by the Guardians Council, which is unlikely as that body is loyal to Supreme Leader Ayatollah Ali Khamenei. But even if the law never takes effect, it is an important development, as it marks the first time parliament has attempted to demand more financial transparency from the vast network of charities under the Supreme Leader’s control.

Ebrahim Raeisi, Iranian cleric and the current custodian and chairman of Astan Quds Razavi. Undated
Ebrahim Raeisi, Iranian cleric and the current custodian and chairman of Astan Quds Razavi. Undated

The AQR was exempted from paying taxes by official decree forty years ago by the founder of the Islamic Republic, Ayatollah Khomeini. The custodian of the AQR, mid-ranking cleric Ebrahim Raeisi, has always argued that the AQR pays its share in Value Added Tax.

Since the downfall of the monarchy in 1979, the AQR has expanded from a modest charity institution into a giant corporation with nearly 20,000 employees, running auto plants, agricultural businesses, cattle farms, and numerous other enterprises.

The foundation owns most of the real estate in Mashhad and rents out shop space to merchants and hoteliers.

The holy shrine administration’s refusal to pay taxes on its hefty revenues has been in the news constantly since 2016 in the run-up to the 2017 presidential elections..

In December 2017, Raeisi said that instead of paying taxes, the shrine, extends financial assistance to the poor. in 2018, the shrine administration was told by Rouhani's government to pay taxes. In 2019, reformist MP Mahmoud Sadeqi disclosed that Khamenei has authorized the Ministry of Finance to refund any tax the shrine has paid. According to Didar News website, during the past 40 years, none of the superintendents of the shrine have agreed to pay taxes for the companies it controls.

It is almost impossible to calculate AQR’s revenues, but according to some estimates, money flowing into its accounts directly may reach $150 million annually, based on the official exchange rate. There maybe other accounts not directly linked with AQR but effectively controlled by it.

Raeisi was President Rouhani’s main challenger in the 2017 presidential race, during which Rouhani criticized his opponent for the fact that the foundation pays no tax.

Retaliating to the criticism, Raise responded at the time “AQR has allotted the poor and the orphans ten times more money than the amount of its imagined due taxes.”

Recently, hardline former President Mahmud Ahmadinejad (2005-2013) joined his successor to blast the commercial activities of the entities under Khamenei's direct supervision, including AQR.

In an open letter to the supreme leader on March 13, 2018, Ahmadinejad noted that the revenues of Bonyad Mostaz’afan, 15 Khordad Foundation, the Executive Headquarters of Imam’s Decree, the Islamic Revolution Guards Corps (IRGC) Cooperatives Foundation, Army Cooperatives, Baseej Cooperatives, the Defense Ministry Cooperatives Foundation, and the economic subdivision of the Imam’s Relief Committee amount to more than 7 trillion rials (roughly $150 million based on official exchange rate), but they are not accountable to the public or the government and never publish balance sheets or activity reports.

Tehran's outspoken MP and Deputy Speaker of Parliament Ali Motahari has also expressed his opposition to the commercial activities of tax-exempted entities under Khamenei's direct supervision, accusing them of disrupting the country's economy.

Earlier, Tehran City Councilor and the Secretary General of the "Neday-e Iranian" party, Majid Farahani, alleged that more than 40 percent of Iran’s economy is dominated by foundations that pay no taxes and win all bids for national construction projects without having to compete with private industry.