Ahmadinejad To Postpone VAT Introduction For One Year
Following strong opposition from the bazaar merchants to the introduction of a 3% value added tax (VAT) on 22 September and its suspension on 9 October for a period of two months, Iran’s President Mahmoud Ahmadinejad has now indicated that he would postpone the implementation of the VAT law for a year. “We are in the process of preparing a bill in order to postpone the implementation of the VAT law for a year and will send it the Majlis in due course,” the president said, according to a Fars News Agency report on 20 October. The new law triggered protest strikes in a number of key Iranian cities which led to the closure of bazaars, where some merchants called for the total scrapping of VAT. The strikes at the bazaars were the first to be called in protest against a government law since the Islamic revolution of 1979.
Mr Ahmadinejad does not want to alienate the bazaaris, who play an important political and economic role in the country, at a time when his economic policies are becoming increasingly more unpopular, especially if he plans to contest the presidential elections next June. The merchants argue that the imposition of a new tax like VAT would push up further already high prices and hurt their business. But the government maintains that the introduction of VAT is part of a comprehensive plan to reform the country’s tax system and increase government revenue, the bulk of which comes from oil and gas. At the same time the government is going ahead with plans to abolish existing subsidies on certain items like fuel and water over the next three years and replace them by cash handouts to low-income bracket citizens. However, a law to this effect has not yet been sent by the government to parliament for approval.
Copyright MEES 2008.
