White Balloon

Daily Journal of Mahaan, an Iranian-American student residing in USA.

Sunday, October 12, 2008

Taxation in Iran

These days there is a lot turmoil in the traditional Iranian market (Bazar). Based on a parliament bill, Ahamdinejad's government has started applying a sales and dividend tax. This is a huge change for the traditional market which will enforce a decent level of revenue transparency. Traditionally, transparency has been minimal in most levels of Iranian economy and bazar is not an exception.

The traditional merchants or bazaris have been knowns as one of the most important power circles in Iran since the revolution time. Strong connection between the traditional Bazar and the Islamic schools and the cleric bodies is not secret in Islamic republic.

The public's take about tax is not quite positive. Similar to US, there is mistrust towards government and people hide their income and property information to minimize their taxes. Some traditional parts of the society, prefer to pay their taxes in religious forms to clerics and religious organizations.

Ahmadinejad is the first government that is trying to change the tax system in the country. Most popular governments like Khatami or Rafsanjani (in his hey days), didn't dare to make major tax changes.... The opposition to the move has been quite strong and like a blow to the Ahmadinejad. There have been large scale strikes in most of the traditional markets such as gold, fabric and carpet. Although the governement has put a hold on the bill's implementation, the strikes continue.... And now the large alliance between Ahmadinejad's group and the traditional right wing of the regime is broken.... Considering the Bazar's political influence, the move can cost Ahamdinejad and his entire clan, the upcoming presidential election and their whole influence on the Iranian politics for years. But on the other side, the move can bring large popularity from the the poor... A large part of depends on the media coverage specially the state's official TV (that is sandwiched between two strong power circles now).

Independent of his motives and the way that things are going to be implemented, the move is the start of a major shake up in Iran's power structure. The outcome is tough to guess, but in the long term it can go as far as weakening the traditional economic establishments and even the traditional clergies in Iran.... But what would it be replaced with? Certainly Ahmadinejad doesn't seem to have a better replacement for such power structure. Most of his policies are random moves with no clear long term plans.... Is this another one of those random ones, or it's one major push? If it's the later, then in the coming months, I expect to see major changes of alliances in Iran's power structure.
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