Iran’s Government Plans To Increase Taxes Amid Economic Crisis

A sharp increase in taxes in next year’s budget bill has shocked both the public and analysts in Iran, signaling a deepening of the current economic crisis.

Entekhab news website in Tehran reported that according to the budget bill, even the monthly incomes of 100 to 140 million rials ($200 to $280) will be subject to a 10 percent tax.

Jahan-e-Sanat daily also warned that the Iranian government has counted on “inflation tax” to fill the next year’s budget. The Iranian calendar and fiscal year begins on March 21, 2024, and the government has already submitted its budget draft bill to parliament.

In order to close its huge budget deficit, the government has projected a 50-percent increase in taxes of various kind compared to this year’s budget. Total expected tax revenues will reach over 11,220 billion rials ($22.44 billion), Jahan-e-Sanat said.

The total government budget will reach 24,620 billion rials ($49.2 billion) next year, which shows an increase of 18.2 percent compared to this year’s budget, the report added.

That is to say, the tax revenues will account for more than 45 percent of the Iranian government’s operating budget, although the 18.2 percent overall budget increase of half what it was this year. Some media outlets wondered what the reason is for a smaller than anticipated budget growth- less than half of the current inflation rate. Some speculated that this can be interpreted as an austerity measure.

Khabaronline news website also called the tax hikes “odd.,” as the government claims more oil exports and insists that it is able to repatriate the income despite US banking sanctions. Iranian oil exports have reached 1.5 million barrels per day from a low of 300,000 barrels in 2019, but the impact of higher revenues is not felt in the economy.

The government has tried to increase “luxury” taxes, as average Iranian live on less than $200 a month. According to Khabaronline, passenger cars worth over 30 billion rials ($60,000) will be subject to a 1 percent annual tax.

Large homes, garden, villas and lands whose value are more than 250 billion rials ($500,000) will also be taxed, the report added.

Another point of significance in the next year’s budget bill is that the government’s currency resources and expenditures have been counted in terms of euro instead of the US dollar. It seems that the government has decided to replace dollar with euro as the basis of its transactions, reformist Arman Daily noted. This is more of a symbolic ideological gesture against the United States.

Tehran officials have time and again stressed the necessity of removing the US dollar from the country’s limited economic transactions with the international community.

During a November 2017 meeting with Russian President Vladimir Putin, Iran's Supreme Leader Ali Khamenei called for the elimination of the dollar in both bilateral and multilateral economic exchanges, aiming to counteract US sanctions.

Aftabnews, a reformist news website, also warned that the government’s general budget next year will grow only by 18 percent compared to this year, which is a far cry from the inflation rate, estimated to be at least 40 percent.

Discussing the worrisome aspects of the next year’s budget bill, reformist daily Ham-Mihan noted that the bill carries a clear messages: the US sanctions will continue and will even get tougher; there will be no economic improvement next year.