President Khatami criticized his government’s tax collecting efforts as “less than desirable.” The huge, cash-based underground economy, a historical distrust of government and taxation, and the weakness of the finance ministry’s tax collection unit, are the three main factors which have kept the government’s tax income to GNP ratio at a low 6 percent. July 10, 2004 – Taxes’ share of national budget fell from 35 percent in 2001 to 30 percent in 2003, whereas oil revenue’s share increased from 57 percent to 62 percent, the central bank’s deputy for economic affairs Akbar Kamijani said on Thursday in Tehran at a conference on taxes. He said the ratio continued its decline after 2003.
He added that tax to GNP ratio has been estimated at 6 percent. In advanced countries the tax to GNP ratio is around 40 percent, while in developing countries it is 20 percent.
Admitting that the government’s tax collection effort has been less than desirable, President Khatami said countries that rely on easily exploitable natural resources often neglect taxation.
In addition to the general disarray in the country’s economic affairs, three specific factors contribute to the taxation weakness in Iran, Radio Farda’s Paris-based economic commentator Fereydoun Khavand says.
The three factors are: large scale tax evasion as a result of the widespread cash-based underground economy; lack of taxation efficiency; and cultural and political norms.
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