Iran tax revenues surpass oil earnings

Published September 28th, 2015 - 12:25 GMT

A new report says Iranian President Hassan Rouhani’s economic strategy to reduce country’s oil dependence has borne fruit as government in currently earning more through taxes than oil sales.

The report, which appeared on the website of the Guardian on Sunday, said for the first time in almost half a century the “Iranian government is earning more from tax than oil” as a result of its policy to “shift its traditional reliance on oil money to taxes in the face of plummeting oil prices.”

The Guardian then quoted Ali Kardor, the deputy managing director of the National Iranian Oil Company (NIOC), as saying that President Rouhani’s economic strategy is to significantly reduce the government’s dependency on oil and instead collect tax more systematically.

“For the first time in 50 years, the government’s share of the oil revenue is less than what it is earning from tax, including VAT (value-added tax),” he told the Guardian on the sidelines of the second Europe-Iran forum in Geneva.

“Only around 10 percent of Iran’s GDP is currently dependent on oil,” the official said, adding that almost 20 percent of oil income goes into a sovereign wealth fund, which is reserved for development purposes.

Iran’s oil revenues took a nosedive in recent years due to sanctions imposed on the country’s energy sector by the European Union and the United States over Tehran’s civilian nuclear program and also because of falling global crude prices.

Sanctions against Iran's oil sector are expected to be lifted when the International Atomic Energy Agency verifies Tehran’s compliance with its commitments as per an agreement reached between Iran and the P5+1 group of countries — the US, the UK, France, China, and Russia plus Germany — in mid-July, also known as the Joint Comprehensive Plan of Action (JCPOA).

According to JCPOA, the six countries have agreed to remove sanctions against Iran's economic sectors, including oil and gas industry, in return for limitations in Iran's nuclear program.

Kardor also told the Guardian that NIOC is going to offer a set of new contracts to foreign investors, worth more than $100 billion (£66 billion), for about 45 potential onshore and offshore fields by November.

“We currently produce 3 million barrels of oil a day, of which 1.3 million are exported but we expect that to increase to 2.3 million in May or June next year,” he added.

Meanwhile, Hossein Rasam, the director of Rastah Idealogistics and former Iran adviser to the Foreign and Commonwealth Office (FCO), said Tehran has taken important steps in recent years to rectify loopholes and move toward tax revenues rather than rely on oil wealth.

“…Now, Iran is pursuing tax collection more seriously and putting itself in order to rely more on taxation,” he added.

Rasam said years of financial stringency under international sanctions have forced Iran to find a way to reduce its reliance on crude, adding, “This is a positive development for Iran, for the more tax people pay, the more accountability and responsibility they will demand from the government.”

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