Major problems for Iran’s next year budget revealed

Posted on December 17, 2012


iran-budgetThe deficit for the next year’s budget, and establishment of the budget itself are the biggest concerns right now for the Iranian government, and the parliament as well.

Not long ago, Vice President for Strategic Planning, Behrouz Moradi said that the budget deficit has been chronic in Iran, adding that there will be deficits and lack of liquidity in the upcoming budget.

He said so that budget deficits would not affect Iran’s economy, the next year’s (1392-Iranian year begins on 21 March) budget must be less dependant on oil revenues, and it also has to be contractionary.

Some experts however believe that the upcoming year’s budget will be hard to make contractionary, becase the budget data is far from transparent, and during the last 5-year development plan Iran’s government took a different turn, which in turn, increased expenses.

The next year, Iran’s oil revenues will dramatically decline due to Western sanctions.

Iranian Minister of Economy, Shamseddin Hosseini said recently that due to imposed sanctions, country experienced a 50-percent reduction in oil revenues.

He also said that the revenue decline is happening because of the changes made to the funding plan of Iran’s construction sector.

According to Hosseini, this year Iran should have gotten some $117 billion in revenues, however due to restrictions and sanctions, the estimated revenues are valued to be around $77 billion.

Hosseini said that in total, Iran’s government is missing some 40 percent of revenues from oil exports, tax incomes and customs.

Iran’s Center for Parliamentary studies has released a report recently, that indicates Iran’s tax-to-GDP ratio to be somewhere between 7-8 percent.

If breaking down Iran’s tax incomes, 40 percent of country’s economic sector is tax deductible. Another 20-21 percent is basically underground economy, that also doesn’t pay taxes.

Obviously, the only true taxpayers in Iran are ordinary people, and traders that work at Iran’s smaller markets.

Iran’s government is so far unable to predict the next year’s budget, because tax incomes, oil revenues and unstable currency rates mostly remain unclear.