New Budget
for
New Economy |
The President sent a letter to Minister
of Economic Affairs and Finance Tahmasb Mazaheri, requiring him to take rapid
action for increasing the share of taxes in the budget. The Ministry of
Economic Affairs and Finance was now responsible for drawing up a new report
in addition to the other important tasks confided to it.
Improving tax law, improving the law for
the attraction and support of foreign investments and approving the law for
aggregating duties changed Iran’s economic relations to a great extent. Deputy
General Minister of Economic Affairs and Finance explained with regard to
these changes and the projects underway in the ministry.
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The Fourth Economic
Development Plan has been drawn up on the basis of a 20-year outlook,
which can provide enough executive guarantees for the implementation of
the plan. |
Mehdi Karbasian believes that Iran’s
capacities are much higher than imagined and they should be realized by taking
strides. He said, "We must not only move within the framework of reforms, but
also go on with the reform agenda more boldly," He emphasized that the new
atmosphere in the region would make it possible for Iran to attain its goals.
The complete text of his interview follows:
Will the President’s request for increasing tax revenues
for 1382 (ending March 2004) be met in the short time that has remained?
Based on the President’s order,
the share of taxes from the country’s overall budget must reach 30% by next
year. This positive policy was discussed by the Cabinet and, as a result of
efforts made by our colleagues at the Tax Affairs and Treasury Organization,
it was decided that mechanisms should be thought for putting this decision
into action. We reached a good agreement with the Ministry of Commerce for
exacting taxes on imported goods as well as businesspeople. Other ministries
and executive bodies have promised to cooperate.
It seems that during the current year, which was the first
year of the implementation of the amended tax law, unions, guilds and
associations did not cooperate with the Ministry of Economic Affairs and
Finance satisfactorily with regard to paying taxes. Have you consulted with
Ministry of Commerce to solve this problem?
You must accept that amending a
law is something and its correct implementation is quite another thing. Iran’s
Tax law had many problems and we removed some of them by amending that law.
However, the amendment alone cannot be influential in creating a suitable tax
culture. It would take a long time to do so and it requires publicity methods.
However, I believe that the overall cooperation of guild unions and
associations in paying taxes has been positive during the current year and it
is obvious that slight problems cannot overshadow this cooperation. Meanwhile,
the number of written declarations submitted by businesses to the tax section
has grown considerably compared to the preceding year. This shows that
trusting people has been a correct procedure and was reciprocated by them. We
must, however, be more careful for the continuation of this process.
Do you think that in view of the current situation, a 4%
increase in budgetary share of taxes could be realized in 1383 (2004-05)?
The current year’s performance
substantiates this fact. The taxes are expected to increase to about 90,000
billion rials next year, which is a big figure.
Part of tax revenues are not realized due to
non-implementation of laws. For example, car exports were expected to generate
350 billion tomans (3,500 billion rials) revenues during the current year.
However, Ministry of Commerce did not agree to the registration of orders for
car imports and the law was not implemented. What guarantee is there to
prevent a similar occurrence during the next year?
Relevant deputies at ministries
of commerce and industries and mines know what happened before the issue of
car exports reached the current stage. What I can say is that part of the
excise tax would be realized though car exports in 1383 budget. All Cabinet
members have agreed to the execution of this approval and have demanded that
car exports must start as of next year.
What would be the impact of amending the tax law on the
economic environment of Iran?
We believe that the tax law has
been very successful and has had great positive impacts on investment,
production and so on. The government’s relation with taxpayers has greatly
improved and its consequences would become evident in a few years time.
Studies show that most taxpayers are satisfied with the new tax law because it
is more transparent and increased exemptions have encouraged people to pay
taxes.
During a recent interview you announced that privatization
revenues would hit 1,000 billion tomans (10,000 billion rials) by the
year-end. Will such a figure be realized?
Yes. I think that real
capacities for privatization are way beyond the current capacity, however,
decisions are needed. For example, as long as the situation of big units has
not been cleared, or the situation of our inquiry about privatization of banks
and insurance has not been clarified, the problem would be there. We have
tried to realize privatization revenues and I think that the 1,000 billion
tomans figure is not unrealistic.
Majlis has approved many laws during past two years that
should have been implemented by the Ministry of Economic Affairs and Finance.
Examples are duties aggregation law, the law for attraction and support of
foreign investments and so forth. What is your opinion about these changes?
The law for the aggregation of duties,
which rid producers from bureaucracy and the maze of decision-making for good
and paved the way for the execution of added value tax law, was a very good
law. However, with regard to the law for attraction and support of foreign
investments I must say that the law alone cannot be instrumental in this
regard. Policymaking in this field would be directly related to political
matters and detente. In fact, any political decision would rapidly affect it.
On the whole, we received the highest number of applications for foreign
investment in Iran during 1381 (2002-03) which shows that the current trend is
improving.
We have taken important measures during
the recent years including approval of the amended direct taxes law, approving
the duties aggregation law, unification of foreign exchange rate, adoption of
tariff policies and reduction of government’s interference. We hope that the
Majlis would approve the money laundering bill in the near future. All these
elements have greatly improved the situation in Iran. Our studies also show
that grounds have been provided for investments in the country by Iranians and
foreigners.
The point that I must remind is that a
positive development in the region has increased the positive impact of our
activities. A peaceful government is ruling in Afghanistan in place of a
warmongering one and a legal government would soon take charge in Iraq.
Anyway, the situation in the region has become much more stable than before
and this is to our benefit. I gather that the continuation of detente policy
has greatly improved our situation in international bodies compared to the
past.
Do you think that the Fourth Economic Development Plan is
practical? Don’t you think that its projected goals are ambitious?
I personally believe that the
capacity of Iran and the Islamic Republic is very high. You look at
immigration figures. Each year thousands of people leave Iran. If conditions
were provided, they would have remained in the country and changed our
economic system. They are not unimportant people, and are capable of holding
key economic posts in other countries. Our country is in a valuable situation.
Our capacities are not small and the Fourth Economic Development Plan’s goals
are not ambitious. On the other hand, ambition is not bad at all. We must
always aim for the heights. To do this, the law alone would not be enough. A
strong will is needed for the advancement of the country and all of us must
work toward this end. The dignity of Iran and Iranians is much higher.
Officials must try to realize people’s rights. The Fourth Economic Development
Plan has been drawn up on the basis of a 20-year outlook, which can provide
enough executive guarantees for the implementation of the plan. Anyway, our
revolution is young. During the past years we have been faced with war and
sanctions. We, as inexperienced directors, have acted on the basis of trial
and error in the economic sector and even some decisions were out of our
hands. However, the situation is now much better and we can realize our goals.
We just have to be bolder.
The government is drawing up new programs, based on which
Iran’s foreign investment strategies would change. Based on these changes what
investments has Iran made in other countries?
Investing in stocks of successful
European companies, the project for commissioning telecommunications line in
Yemen, investing in Iran-Egypt bank and the textile company of Iran and Egypt,
banking activities in Jordan and launching an investment company in Dubai are
among lucrative investment projects carried out by Iran in other countries.
Furthermore, the Foreign Investment
Organization was planning to discuss new plans for elucidating activities in
other countries during its general assembly session that if approved, would
delineate a promising future for Iran’s strategies in other countries.
The Minister has put emphasis on
investing sums earned through selling Iran’s stocks at ThyssenKrupp, and these
sums would be invested in economic projects inside Iran in cooperation with
foreign investors.
What can you tell us about the ‘Iran Fund’?
The plan for establishing an investment
fund known as ‘Iran Fund’ which was launched a few months ago by the Iranian
government in the capital market of Bahrain has come against hurdles, but the
government intends to restart the project to develop the capital market.
The Iran Fund, which has been launched
in the Bahraini capital market several months earlier was supposed to register
$50 million of underwriting, but it received applications worth $30 million
during the first stage and, finally, succeeded to register equal to $20
million underwriting while about $12 million had been also settled to the
fund.
Was this fund successful in achieving its goals?
Due to international pressures against
Iran’s activities and the ballyhoo regarding inspecting Iran’s nuclear
installations, the plan for establishing the said investment fund, which is
affiliated to Ministry of Economic Affairs and Finance failed.
The government intended to link the
country’s capital market to those of the Persian Gulf through inaugurating the
fund and despite enthusiasm of foreign investors, political pressures exerted
by the United States against Iran, caused the plan to fail.
Investors that had participated in
underwriting for Iran Fund stocks to avail of hefty profits of investment in
Iran withdrew their deposits without any problem due to political pressures
against Iran and the Iranian government decided to postpone inauguration of
the international investment fund.
In addition to the Ministry, who else was behind the fund?
The plan was sponsored by the Iran
Foreign Investment Company, HSBC Bank and Saderat Bank and the sums that were
expected to be earned through underwriting of the fund’s stocks were to be
invested in Iran’s capital market.
Iran needs to be connected with
international capital markets, and the temporary failure of the plan does not
mean it will be totally abandoned and the government is determined to
reactivate the fund after the political situation in the region becomes
calmer.
New strategies for Iranian investment in
other countries are being formulated, and Iran is trying to change the
situation of its foreign investment by drawing up a new strategy. However, we
have made no new decision about selling the remaining stocks of Germany’s
ThyssenKrupp. |
