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of 85mn, with the richest Iranians excluded. The subsidies, amount to Iranian rial (IRR) 460 trillion ($1.6bn at the open market rate) for a period of two months. Around one-third of the population are receiving a monthly IRR4mn ($13), while 60% are receiving IRR3mn ($10) per qualifying individual, according to local press reports. There are plans to introduce a digital coupon scheme within around two months to help keep prices on a leash. It will focus on subsidised bread, chicken and vegetable oil prices.
Raisi’s officials claim Rouhani’s implemented approach to restraining prices was faulty. Rouhani four years ago brought in an artificial official rate of 42,000 rial per dollar for imports, while on the open market the rial climbed to a rate of more than 300,000 as the US kept up the sanctions pressure with ex-president Donald Trump waging “economic war” on Iran, in the words of Tehran officials. The consensus is now that Raisi’s scheme failed to stop prices soaring (official inflation in Iran presently stands at around 40%). And, worse, corrupt intermediaries in trade were able to fraudulently exploit the system to hugely enrich themselves.
Rouhani has been unable to remove the subsidised currency rate, given anxieties that doing so could set off an inflation surge, but he has expressed an intention to phase it out.
Pro-reform economist and journalist Saeed Leylaz told Al Jazeera: “Up to 70% of the subsidy funds from the former policy would get lost on their way to reaching the people.
“Moreover, estimates show about 15 million people living close to Iran’s borders—in Iraq, Afghanistan, Pakistan and even northern borders—benefitted from Iranian subsidies on goods like wheat and medicine in the form of smuggling. That can now stop, too, which I think will save a considerable amount of money for the country and lead to economic growth.”
He also cautioned that the sustainability and long-term success of the reforms would hinge on how well Raisi can tackle the money supply.
6.2 Taxation
Iran’s parliament under fire for deciding FTZ businesses must pay VAT
The Iranian parliament has come under fire for deciding that businesses located in Iran’s free trade zones (FTZs) should pay value-added tax, ILNA has reported. Secretary of the High Council of Free Trade Zones and Special Economic Areas, Saeed Mohammad, was reported as complaining that the measure would scare away investors.
“Over the past few years, we have experienced capital flight to Turkey and now the UAE. The recent decision made by the parliament is harming economic activity in our FTZs,” Mohammad was quoted as saying.
In making the tax move, parliament had brought to an end almost all the advantages of Iran’s FTZs, he reportedly stated, also adding: “The parliament is not cooperating in granting customs tariff exemptions to businesses operating in FTZs. This is while our neighbouring and regional countries are offering export incentives, tax relief and exemptions in FTZs and special economic zones. Some countries offer tax exemptions of around 30 years and in the UAE it even goes up to 50 years.”
38 IRAN Country Report September 2022 www.intellinews.com