VAT Tax Mechanism Put on Hold

TEHRAN (FNA)- The Iranian president in a directive to the finance minister has called for suspending a new value added tax mechanism for two months.

President Mahmoud Ahmadinejad’s decision comes after the mechanism faced widespread criticism business people in large cities.

In Tehran’s bazaar, shops were closed down in protest against the measure.

Similar work stoppages have also been reported in several other major provincial cities including Isfahan and Tabriz.

This has pushed the government to announce that it will review the new VAT mechanism, press tv reported.

Under the new VAT policy businesses would have to pay the government 3% of their sales receipts. The measure is meant to lower inflation, but it has already sparked fears of further price hikes.

This is the first time that VAT has been introduced in Iran. Prior to the legislation, the government imposed sales taxes on the total value of goods and services.

The protests follow Minister of Commerce Masoud Mirkazemi rejecting the notion that the VAT is the cause of bazaar closures. He criticized merchants for increasing the price of their goods with the introduction of the VAT.

“Businesses should not raise prices because the value-added tax is a substitute for previous multiple levy regulations,” Mirkazemi told Fars news agency, adding that authorities will investigate cases involving price hikes.

The minister also assured the public that the bazaar closures would not lead to any delay in the implementation of the new tax regulation.

However, comments by the president of Iran’s Jewelers and Gold Dealers Guild contradict Mirkazemi remarks.

“The implementation of value-added tax has been postponed for 3 months,” said Kourosh Goharbin, affirming that the delay was the result of a bargain reached with the taxation authority.