Finance minister says tax should make up for oil revenue loss in budget

Tehran, Dec 18, IRNA -- Minister of Economic Affairs and Finance Ali Tayebnia says reliable tax income is a good substitute for volatile oil prices in the budget. In a message to Iran’s Fiscal and Tax Policies Forum which kicked off in Tehran Wednesday, Tayebnia said in recent years the country’s budget has been largely reliant on oil revenues with restrictive consequences on fiscal policies of the government. He added: 'Boosting share of non-oil exports and at the same time raising the share of taxes as a sustainable source of income in the budget is an appropriate solution to edge down reliance on oil revenues.' The minister further noted that the government was determined to change economic situation fundamentally by having a scientific attitude towards different aspects of the economy. He said: 'Despite remarkable initiatives taken over the last two decades in the country with the aim of developing an appropriate tax system, taxes have not found their right place in the economy as a sustainable fiscal instrument which is partly the result of the strong role oil revenues plays in Iran’s economy.' Exemption of a large part of the economy from paying taxes, which is estimated at 43 percent of GDP, the weak role of the taxes in the economy, low ratio of taxes to GDP and low level of the share of taxes in funding current expenditure of the government are indications of the inappropriate place of taxes in the economy, Tayebnia said. “Under the present circumstances when over 43 percent of the economy is not being taxed, other factors like the low ratio of tax to GDP (gross domestic production), small share of tax revenues in government expenses, and low ratio of tax to general revenues would further minimize the effect of tax revenues on the economy.” Almost every economist in Iran believes that currently tax revenues do not play a key role in the economy. In his message, Tayebnia insisted on the vitality of increasing tax revenues and the need for improving business environment. He said previous governments have overtly relied on oil revenues while tax revenues are the indisputable and enduring source of revenues for any government. Tax is directly related to GDP growth. The government can collect more tax if it pays more attention to domestic production by increasing production capacity and improving business environment, which would in turn leads to the rise of tax revenues, he explained. Investment plays an important role in the process of economic growth. Expanding tax basics to earn tax revenues from unproductive economic activities and restricting tax exemptions can spur investment and production, he added. The minister also said that the administration is working on a plan to reform the current taxation system with the aim of increasing the share of tax revenues in annual budgets. On the sidelines of the conference, Ali Asgari, head of the National Tax Administration, told reporters that the parliament is expected to approve the tailored version of the tax bill in less than a month. The bill for value added tax has already been prepared by the NTA and submitted to the government for approval, he added. In next year’s budget bill proposed to the parliament on Dec. 7, tax revenues account for about half of the government’s total revenues, according to Asgari./end