Iran’s Tax Haven: The Super-Rich Enjoy Lucrative Evasion Schemes

In a country where the wealthy population has grown by 21.6 percent annually, it seems ironic that the majority of Iranians are struggling to make ends meet amidst an economic crisis. According to Forbes magazine, Iran has 250,000 millionaires, ranking fourteenth globally in terms of rich people. However, despite the staggering number of wealthy individuals, tax evasion schemes have allowed them to enjoy their riches with little to no scrutiny.

Economic Crisis and Tax Evasion

Iran’s economy has been in decline since 2017, with a nearly 5 percent drop in GDP in 2020 due to US sanctions. The country’s budget deficit is a whopping $12 billion, more than 30 percent of the total budget. To compensate for revenue lost, Iran has implemented new tax policies, but they seem to have little impact on the super-rich.

Tax Haven Opportunities

• Interest on bank deposits is not taxed, making it an attractive option for wealthy individuals to park their assets and avoid paying taxes.
• According to Omid Ali Parsa, the former head of Iran’s National Tax Administration (INTA), half of the country’s billionaires pay no taxes, while the other half pay less than required.

Estimated Tax Evasion

Tax evasion in Iran is estimated at one quadrillion rials ($3.125 billion), with 50 percent being direct tax evasion and the rest due to refusal to pay. Rajab Rahmani, a member of the parliament’s budget committee, revealed that tax evasion equals the budgets of fifteen of Iran’s thirty-one provinces.

Government Failure

One reason for the lack of taxation is the government’s failure to provide sufficient information to the tax agency. For instance, a tax on luxury and expensive houses has been in the country’s budget for three years, but no revenue was obtained from this source in the first two years.

Power and Influence

• The super-rich have managed to change some laws to their advantage due to their access to centers of power.
• Only 35 percent of physicians are registered in the tax system, and they pay a limited 10 percent tax on their income while others pay up to 30 percent.

Tax-Exempt Institutions

Some institutions under the supervision of Supreme Leader Ayatollah Ali Khamenei are exempt from some taxes, including the Astan Quds Razavi and Mostazafan Foundation. The first is a religious institution that is under the direct supervision of the Supreme Leader and possesses a lot of urban real estate across the country.

Public Resentment

The government’s inability to change its policies in favor of the majority has led to widespread public resentment towards the super-rich who are able to avoid paying taxes. It remains to be seen whether the government will take steps to address this issue in the future.

Conclusion

As Iran continues to struggle with an economic crisis, it is clear that tax evasion schemes have allowed the super-rich to enjoy their riches while the majority of Iranians suffer.