Mohammad-Hadi Sobhaniyan, the head of the Tax Administration of Iran’s regime, announced that during the first seven months of the current year (from March 21 to October 23), the ratio of tax revenues to oil revenues in funding the general state budget reached an unprecedented level of 5.5 times. Can this figure be considered a sign of efficiency in the regime’s tax system?
Sobhaniyan said on Saturday, November 29, that the ratio of taxes to GDP had reached its highest level in seven years.
He added that this ratio had risen to 8.3% based on Central Bank figures and to 6.4% according to the Statistical Center of Iran.
The Iranian Regime’s New Tax Law: Collecting Taxes from Citizens on Inflation
Sobhaniyan described this development as “the result of implementing smart policies, improving taxpayer compliance, and expanding systemic auditing,” adding: “The rise in the tax-to-GDP ratio is a clear sign of budget sustainability, reduced reliance on oil, and the enhancement of tax justice.”
Earlier, on August 16, Masoud Pezeshkian, the head of Iran’s regime government, issued the directive to enforce the “Speculation and Arbitrage Tax Law,” a law whose legislative process began in 2020 and aims to tax half of the nominal increase in the value of people’s assets caused by inflation.
This law had been approved by the regime’s parliament on June 29.
“A major portion of the government’s current expenses is funded through taxes”
The head of the Tax Administration went on to state that the ratio of taxes to government current expenditures had reached “an unprecedented 65.5%” last year and that a major portion of the government’s current expenses is now funded through tax revenues.
According to Sobhaniyan, the ratio of taxes to current expenditures rose from 40.9% in 2021 to 65.5% in 2024.
Under Ebrahim Raisi’s administration, from July 2021 to April 2024, Iran’s tax revenues saw a sharp increase; a trend that coincided with growing poverty among Iranian citizens.
The state-run daily 7Sobh wrote on November 13 regarding the consequences of rising taxes: “While the government has turned to increasing tax bases to compensate for its budget deficit, the main burden of this policy has fallen on small businesses and minor trade sectors.”
According to the report, taxes on businesses such as barbershops, restaurants, small grocery stores, repair shops, and clothing retailers increased on average by 15 to 20% in 2024.
Small workshops in the food industry and building-material sectors also faced roughly 10 to 12% increases in performance taxes.
Meanwhile, all businesses, in addition to taxes, are facing cost pressures imposed by inflation above 45%.
These costs have not only increased production prices but also drastically raised the final price of services.
Earlier in June, the state-run Tasnim News Agency wrote that rapid growth in tax revenues in Iran without corresponding growth in GDP or improvements in the business environment could be concerning.
This IRGC-affiliated agency described tax revenues surpassing oil revenues as a milestone for Iran’s economy, while also stressing that achieving any positive impact depends on identifying tax evasion, fairly distributing the tax burden, and allocating stable revenues toward production infrastructure and social welfare.
However, reviews of media reports and the views of critical economists show that the government has taken no significant measures to develop production infrastructure or expand social welfare.
The 5.5-to-1 ratio may stem from declining oil revenues rather than increased tax efficiency. If oil income has dropped due to sanctions, export restrictions, deep discounts, or low-price transfers to China, the tax-to-oil ratio rises artificially.
The largest actors in Iran’s economy—such as the Executive Headquarters of Imam’s Directive, the Foundation of the Oppressed, Astan Quds, Khatam-al Anbiya Construction Headquarters, hundreds of paramilitary subsidiaries, dozens of religious, promotional, and clerical institutions, and a vast network of front companies tied to security agencies—pay virtually no real taxes.
The regime’s reliance on taxation crushes small and medium-sized businesses, resulting in bankruptcies, halted economic activity, and ultimately reduced employment and declining economic growth.
