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Government-linked institutions in Iran do not pay taxes

Financial corruption is institutionalized in Iran’s regime
Financial corruption is institutionalized in Iran’s regime

Analysis by PMOI/MEK

Iran, September 11, 2021—For several years now, the regime has been meager cash handouts as a subsidy to the low-income branches of the society. This is about $1.70 a month.

In any country, subsidies should belong to deprived people. In Iran, however, these subsidies have practically gone into the pockets of government-linked entities. According to regime officials, the subsidies that have been given to the people to this point are far less and merely 20 percent of the subsidies provided to government institutions.

Another subsidy that has practically failed is 42,000 rials government-dollar (each USD is being exchanged at about 280,000 rial in the market).

"Following the failure of the 42,000 rials exchange rate policy (Preferential Exchange Rate) to control the exchange rate in the free market, and its secondary goal of controlling the prices of basic goods, after two years, it can be said that this policy has failed completely. According to the Statistics Center, in the first five months of this year, inflation of food items was 58.4 percent and of non-food items was 36.1 percent, while most food items directly and indirectly received subsidies of 42,000 rials for each dollar. Importing goods with the preferential exchange rate is so attractive to importers that the number of companies active in the import of animal feed has exceeded 400 since the allocation of this currency for the import of basic goods, while the number of companies active in this field were15 prior to this plan," according to a September 9 report by the Vatan-e Emrooz daily.

It is worth noting that the people have not benefited from the policy of allocating 42,000 rials preferential exchange rate for importing basic goods.

The situation was similar regarding to energy subsidies, and it was the institutions and entities affiliated with the regime that are benefiting yet again.

"Some people who are well off financially and have a large amount of property and assets are benefiting the most. All the while, a villager enjoys a very small share of the energy subsidy," said Massod Mir Kazemi, head of the regime’s Plan and Budget Organization, according to the Shargh daily in a piece posted on September 9.

Regarding the poor people’s share in gasoline and gas subsidies, the Javan newspaper, affiliated to the Revolutionary Guards (IRGC) wrote on September 6: "According to the Plan and Budget Organization’s report, in 2019, about 9 quadrillion rials (around $70 billion at the time) of energy subsidies were provided to individuals. The share of the first decile, being the poor and low-income groups, was only 1.2 percent, while the share of the tenth decile, consisting of the society’s rich upper class, was 25 percent of the total subsidy paid for the country's gasoline.”

The people’s share in energy subsidies is very small, and more than 98 percent of it goes to the rich who are affiliated with the government, and factories and institutions associated to regime Supreme Leader Ali Khamenei and the IRGC.

The small cash subsidy of $ 1.70 per month, allocated to low-income groups, is taken out of their pockets through a variety of deceptive measures, such as collecting taxes or raising the prices of basic goods that they need.

"They increase taxes while they should be collecting these taxes from state-run foundations and enterprises that are tax-exempt due to their dependence on power. According to official statistics, we have 750,000 trillion rials (about $ 3 billion) in tax evasion across Iran, while I believe the real figure is more than that,” said economist Mahmood Jamsaz in an interview with the state-run Kar-va-karegar daily on September 9. “All the large entities and governing bodies have billions in transactions yet do not pay taxes. Some of them are even tax-exempt. Many government agencies are included in the government’s annual budget bill but have no role in the country’s gross domestic product. Instead, taxes are levied on vulnerable groups and not these institutions. Taxpayers must pay their taxes before they even receive their salaries. Due to the corrupt system that has existed for years, goods reach the consumer at high prices, therefore reducing consumers’ purchasing power. That is why a large part of the society is not able to make their ends meet."

According to state media reports and regime officials, a very small share, around two percent of the subsidies, goes to the deprived people.

The state-run Hamshahri website posted a video report acknowledging the rampant rise in prices caused by government-linked circles, dubbed in Iran as the “state mafia.” People's purchasing power has decreased by 35 percent since March 21 of this year.

At the same time, at the height of the fifth coronavirus wave in Iran, and while according to official statistics about 600 people are dying every day, the high cost of medicine and its absence puts even more pressure on the general public.

"According to the spokesman of Countering Smuggled Goods and Currency Task Force, of the 340,000 billion rials (about $1.22 billion) spent each year on medicine across the country, around 250,000 billion rials (around $1 billion), equal to 80 percent, cannot be tracked and the medicine exits the distribution network through this hole. This is an ongoing tale story with a long history. None of the country's officials, including health and pharmaceutical officials, or those of the Countering Smuggled Goods and Currency Task Force, deny the medicine leak from the distribution network into the country’s black-market,” reads a September 8 piece published by the Javan daily.