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Iran VAT suspension stirs controversy

12/16/08 Report by Press TV

The indefinite suspension of the value-added tax (VAT) plan by Iranian President Mahmoud Ahmadinejad has sparked heated debate in Tehran.

In July 2008, the Iranian government announced that a VAT mechanism would be introduced in the country by autumn, under which businesses would have to pay 3 percent of their sales receipts as tax.

Following 10 days of widespread demonstrations across Iran in October, President Ahmadinejad announced that he would introduce a bill to delay the implementation of the new tax mechanism by at least one year.

Iranian Minister of Economic Affairs and Finance Shamseddin Hosseini, however, announced on Saturday that his ministry had sent a draft bill to the government for Cabinet ratification.

"The government aimed to introduce a plan for better economic situations, but the conditions did not permit the task and therefore the government delayed the implementation of the law," he said.

According to Iranian daily Sarmayeh, however, legal experts now believe that the government must first receive a parliamentary vote to be able to suspend the implementation of the law.

The paper also cites various officials as affirming that the VAT scheme should be dropped altogether as it is considered by some informed sources in the taxation organization as a "failed plan".

The VAT controversy is further fuelling debate over the sweeping economic reform package introduced by the Iranian president.

Official figures from the Central Bank of Iran reveal that annual inflation stood at 29.4 percent in the twelve months that ended in September. Some economists predict that the current situation could prompt Tehran to face a serious budget deficit within months due to falling oil prices.

In an open letter to the president, 60 leading economists from major Iranian universities recently slammed the Ahmadinejad administration for not taking corrective measures to deal with the country's economic decline, saying the government's economic plans are costing the country dearly at a time of crisis.

President Ahmadinejad, however, has responded to the criticism leveled at his economic policy. "It is vital for the government to adopt a correct policy because the country is currently losing economic opportunities," he said.

According to the Iranian president, the economic reform package submitted to parliament will eventually be able to resolve the economic problems that the country has seen in the past years.

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