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Khamenei Reportedly Gives Tax-Exempt Status To Entities Under His Control

IRGC leaders meeting with Ali Khamenei, the Islamic Republic Leader. File photo

Iranian National Tax Administration has officially published the list of ten "Islamic" foundations and institutions under Ayatollah Ali Khamenei's supervision as tax exempt entities.

These are opaque corporations that dominate large portions of the country’s economy but are now legally exempt from taxation.

The official news agency (IRNA) reported that seven of these tax exempt entities receive seven trillion rials (roughly $166 million) from governmental funds annually.

The office of Iran's Supreme Leader had earlier ordered the taxation authority to make these corporations exempt from tax, reports from Tehran said. Two of these institutions belong to Khamenei's own office, dubbed the Leader’s Household in the Islamic Republic jargon. One is tasked with the publication of Khamenei's comments and sermons, and the other one is in charge of the Household’s economic affairs.

A day after this announcement, a deputy in the tax administration contradicted the initial news, saying that these entities do pay taxes. It is not clear if by this denial authorities wanted to dampen the negative impact on public opinion of powerful entities being exempted from taxes.

The Mostazafan Foundation (Foundation of the Oppressed), the Executive Headquarters of Imam's Directive, The Martyrs and Veterans Foundation, the Imam Khomeini Relief Committee, Islamic Propagation Organiztaion, the Islamic Propagation Office of Qom Seminary, Iran Islamic Revolution Housing Foundation, the Center for Services for Islamic Seminaries, Islamic Revolution Cultural Research Institute and Al-Mostafa Seminary for non-Iranian clerics, are listed as the entities that enjoy tax exemption.

In recent years, the tax exempt entities directly related to the Islamic Republic's Supreme Leader, have faced bitter criticism for not paying tax.

Some of the tax exempt organizations, including the Mostazafan Foundation, have maintained that they pay their due value added tax (VAT). However, critics have argued that VAT is ultimately paid by the foundations' clients and is different from the taxes annually paid by other financial and economic entities.

Economists have blamed these ten entities and the IRGC (also supervised by Khamenei) for a major part of the economic crisis that has nearly paralyzed Iran's economy and contributed to widespread social unrest during the past year.

The question of tax exempt institutions turned into a heated debate between the incumbent, Hassan Rouhani and his main challenger during the last presidential election in May 2017.

Rouhani tried to draw public attention to the opaque corporations that dominate large portions of the country’s economy but are legally exempt from taxation. These include companies controlled by the Islamic Revolution Guards Corps (IRGC), monopolized state-owned Radio and TV network, The holy shrine in Mashad (managed by Rouhani's main challenger last year, mid-ranking cleric, Ebrahim Raeisi), a financial empire in Iran's second largest city, and the Executive Headquarters of Imam's Directive.

Apart from the tax issue, according to Tehran's outspoken MP, Ali Motahari, while many of the tax exempt institutes and so-called Islamic charities receive their budget from the government, they are not accountable to it.

Expressing his opposition to the activities of the Executive Headquarters of Imam's Directive, Motahari asserted in March 2016, "Such entities are responsible for the economic disruption across Iran."

Furthermore, Tehran city councillor Majid Farahani, has said that more than 40% of the country's economy is controlled by foundations and organizations that do not pay any tax, but, relying on their power and economic sway, win all national construction and development contracts in an unfair and unequal competition with the private sector.

Last December, widespread protests across Iran were ignited days after the Rouhani government budget was proposed, showing huge outlays for religious organizations and opaque corporations.