Abarmard

Oil money

Oil money is in America too.  How is oil money made and how is it spent? I mentioned that in my comment that it was all Standard Oil first, but then it got chopped off into smaller pieces.  Besides oil is just one of the industries

Iran can privatize it's oil industry too and tax it.  But we are so far away from it.  All of intellectual dialogues (ghormeh sabzi talk :-) that you see Iranians exhibit, all started and is surrounded by this oil money.

Given a better organization oil doesn't have to be privatized like America.  Russia has its Gasprom for example and it is semi private.  Russia is not a godd example or country, but it is somewhere between American oil and Iranian oil. 

oil & taxes

One of the main problems with so much oil money going to the government is that it becomes too independent of the general population. But a government that taxes its population 'owes' the people their dues and rights because the people are the paymasters.

In Iran we have a traditional aversion to payment of taxes. Taxes are seen as something like 'protection money' extracted by those who have grabbed central power. Oil money only makes this outlook stronger. People say: you have all that oil money so why won't you stop bothering me!

It is a bit of a catch 22! More taxes would mean more civil engagement and democracy (by default) but people believe they are protecting their rights by not paying. In the long run, greater tax collection at reasonable rates should be a positive development for the growth of civil society in Iran.

But a VAT system seems like a complicated way of achieving this. Why don't they improve collection of income taxes first? Perhaps they want to concentrate on indirect taxes more.

Seems like bad timing though with inflation being so high right now. VAT effectively leads to consumers paying more taxes rather than producers with businesses acting as collection agents for the government. But if businesses cheat in the process, VAT will end up going from the pockets of consumers into the pockets of retailers, particularly in the case of low value added items.

Complicated issue! 

Peace!

1 million tomans

1 million toman (3 years or so ago figure) was added to price of every car that was "assembled" in Iran and sold to Iranian customer. Money was directly deposited to Rahbar's personal bank account.

Needless to say, the whistle blower is no longer whistling.

So, these anti Iranian occupiers of Iran will find a way to take the money from citizen, either in form of some phoney licenses fee or increase on price of everyday goods.

Sales Tax and/or VAT are Regressive

Generally it is held that sales tax or any "consumption tax" - as opposed to income tax - is regressive. Meaning that it hurts the poor since it forms a higher percentage of their income than the rich folks, and if you're taxed for necessities (some places exempt food and drugs from sales tax) you can't avoid it. On the other hand income tax hurts the rich more than the poor- the higher your income the higher your taxes.

Then there is the question of tax administration. Merchants have to keep proper records, issue receipts, and collect and handover the tax to the government. In a cash based economy, this is next to impossible to do.

-Hameed

VAT

I gained my education and expertise at Khoroos Neshan University (KNU).

In regards to VAT

before the Iranian public pay a dime of TAX the Mullah government should tell them where is the 35 billion dollars that is missing from treasury just this year alone.

The government that is oppressive and is not accountable to it's people can not go around and collect taxes and spend it on Mosques and Hezbollah's adventure. So, Mahmud is again in dreamland.

VAT

I think VAT is a brilliant idea. The days are fast approaching where petro dollars will no longer suffice to finance the government, especially a bloated beauracracy such as Iran's. You conspiracy theorists need to give it a rest. Contrary to the falsehoods propagated by our Iranian culture, not everything needs to have a sinister motive. Not everything needs to be feast or famine. To the person who suggested Iran must privatize the oil industry before implementation of a sales tax, I was wondering where exactly did you gain your expertise in finance? You may want to ask for your money back on your tuition.

Fat Chance

Mahmud is the one that forced the banks to charge interest less than inflation. There is no way that anyone can change his mind and he is a hard core believer in Islamic rules and tradition. Also Mahmud is a boor from backstreets of Tehran. You can not get a guy like that to think straight over night and do the right thing.

Anonymouse

Very good points.

They wouldn't let someone in the village, he asked for Mayor!

The Iranian economy has always been based on oil revenue, up to 80%.  It was even like this during the Shah.  The reason you see so many small shops working side by side and selling the same thing in Iran is because there are no other jobs and population exploding, because of IRI's advice early on.

When you drive and go through the country roads you see mechanic shop next to mechanic shop offering mechanical services and oil change. I sometimes wonder how they can make a living with so much competition and which one does a customer choose?

In order to be able to properly tax people, first you have to privatize the oil industry.  Then you have to have anti-trust laws to protect the consumers like when they did it with Standard Oil and broke it into smaller pieces, or like the ma Bells in telecom industry.

Then you need to have other industries where you can produce jobs for the 70+M and counting.  Once you have an economy that can sustain itself, then taxing and providing services would work.  This is the macro-economics in general from my college days. 

Presumably IRI is trying to privatize many industries or at least put it on stock market, but it is just a show.  Corruption is so rampant now that people are starting to talk about why they are not seeing any benefits from the $140 a barrel oil.  They are asking where the money is going.

So, taxing is not going to work, certainly not on top of 25% inflation! This is another one of Ahmadi's idiodic moves like gharzol hassaneh banks or printing more eskenas (money) or firing his ministers only to have them as his new bosses!!

A GARDENER

Ahmadinejad looks and acts like a gardener. It looks like he is mullahs' last card. He is also a classic example of extremism in our country. He wants to fight the west then he copies them too. Maybe he is not informed enough to know VAT concept is a western taxation system.

If you have his office phone number kindly let me have it because I like to call him.

GOD SAVE IRAN.