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Iran's Privileged '60 Percent'

Iran's Privileged '60 Percent'

If only two things in life are certain, death and taxes, why do so many Iranians get a free ride when it comes time to contribute to state coffers?

From state enterprises to private firms, a huge number of Iranian entities benefit from tax breaks and exemptions, and it is becoming a big, big deal.

President Hassan Rohani, who is tasked with saving Iran's economy from the two-headed monster of sanctions and falling oil prices, has openly supported calls for income taxes to make up for expected shortfalls in Iran's next budget.

This doesn't sit well with a privileged group that, in Iran, goes far beyond the 1 percent that draw so much criticism in the West. An estimated 43 percent of Iran's gross dmestic product goes untaxed, Economy Minister Ali Tayebnia said this week, the result of a loophole that often frees entities from having to pay income taxes entirely.

In addition, Iran's tax administration recently placed tax evasion among all economic activities at 20 to 25 percent, denying the country's economy of another large nugget. This all means, by IRNA's recent calculation, that "more than 60 percent of economic activities in the country are either conducted off the books or exempt from taxation."

In some cases key state industries and sectors, such as agriculture and those involved in culture and education, have permanent, 100 percent, exemptions. Others, like industry and mining and those involved exports and non-oil goods, get full tax breaks for periods of up to 20 years. Incomes for rural, tribal, and agricultural cooperatives go untaxed. And private companies and those involved in tourism can receive tax credits of up to 50 percent.

But where Rohani and his economic team see a wealth of untapped revenue, efforts to eliminate corruption and remove tax privileges puts them in direct confrontation with some powerful forces. Many of the entities in question are controlled, for example, by the Islamic Revolutionary Guards Corps (which itself is controlled by Supreme Leader Ayatollah Ali Khamenei) and others happy with the status quo.

As the proposed budget for Iran's fiscal year beginning in March winds through parliament, the Iranian media is watching closely. The present tax regime cannot be expected to last for long, the Persian economic weekly Tejarat-e Farda wrote this week, estimating that reforms can double tax revenues.

-- Michael Scollon