Press TV - Iran's President has announced the implementation of value added tax in a move that will fundamentally reform the country's tax system.
The VAT bill was presented by the Iranian government five years ago to Iran's Majlis (Parliament) but the realization of a VAT effectively ends decades of waiting for tax reform in the country to take shape.
President Mahmoud Ahmadinejad reportedly directed the Ministry of Economic Affairs and Finance to implement the new tax law for a 5-year trial period after it was determined among other things that tax collection agencies across the country had been upgraded with the computer technology necessary to put the VAT into action.
Value added tax is a levy imposed on the exchange of goods and services. In simple terms, a VAT is a type of national sales tax. However, it is imposed on the 'value added' onto the goods or services at each stage of the production process. VAT differs from a sales tax because a sales tax is levied only once on the total value of the exchange.
The difference is crucial because although a VAT has its drawbacks -- it is far more complicated to calculate and to collect -- the collection of tax at each stage of production greatly reduces the likelihood of nonpayment of taxes or other tax fraud.
The new VAT law consists of 53 articles which cover the supply of all goods and services as well as imported and exported goods.
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