Tax is one of the key economic variablesWednesday, Feb 28, 2018Speaking at the 11th Conference on Tax and Fiscal Policies in Iran, Taghavinejad said tax is the most important source of reliable and sustainable financing.
(SHADA: TEHRAN) – Taghavinejad, Head of the Iranian National Tax Administration, stated governments, on behalf of the people and as the administrator of the society, need a lot of financial resources to carry out their intrinsic duties in various fields such as security, education, health and the production of public goods that the private sector is not willing or able to produce.
Tax is considered as the most important source of reliable and sustainable financing, he added.
However, one should not overlook the fact that its limiting effect on productive sectors of the economy is always one of the main concerns of economic policy in general and tax policy in particular, Taghavinejad said.
Undoubtedly, any attempt to develop the tax system without recognizing the elements of this system -- including production and its distribution, tax laws and regulations, the tax collecting organization, as well as the goals and functions of taxes and various institutional and non-institutional barriers, and in particular the breakdown of these barriers in the context of the country's economic, social and cultural system – will be impossible, he stressed.
He pointed out the goals and necessities of the reform and development of the tax system and said: The goals or forces driving tax reforms in all countries around the world are almost identical. Part of these goals are rooted in the necessity of financing the government budget through taxes and others are based on the economic and social functions of taxation as a means of allocating resources and redistributing income and wealth in society.
With regard to financing objectives, the tax-to-GDP ratio and the share of tax in the general budget are two important indicators for assessing the extent to which this goal is being achieved, he continued.
The Deputy Minister of Economy said that although the desirable size of these indicators varies from country to country, 15 to 20 percent of the tax-to-GDP ratio and 60 to 70 percent of the share of tax in the general budget are considered appropriate.
The significant gap between these indicators not only with the current state of the country's tax system, but even with the goals set forth in the upstream documents in the tax sector, indicates the necessity and importance of developing the tax system, he noted.
He stressed that the country's tax system faces many challenges in carrying out its tasks and achieving the goals set forth. These challenges can be addressed in three broad areas, including the challenges posed by the macroeconomic structure of the country, the challenges posed by the policy process, tax laws and regulations, and, finally, the challenges of implementation.
He noted that the challenges of the macroeconomic structure are inappropriate combination of national production and its distribution in the country.
According to him, the challenges of developing the tax system include the challenges of the policy process; policies, laws and regulations of the tax; lack of a specialized and comprehensive authority for the formulation of tax policies; plurality of influential and beneficiary authorities in the process of formulating these policies; ineffectiveness of the current tax system; widespread and inefficient tax breaks; and lack of legal framework for the implementation of the comprehensive personal income tax system.
As to the executive challenges, he said they include the lack of independence and adequacy of the organization's budget, lack of resources (skilled manpower, financial resources, physical resources), source-oriented structure of the organization, lack of cooperation in the creation of a comprehensive economic database, disparity between the two parameters of tax resources and manpower in terms of legal considerations related to non-productive goals, high tax breaks, and programs for reforming and developing the tax system