Step by Step Enforcing VAT System in Iran (in Persian)

The delay of Value Added Tax (VAT) system enforcement in Iran contrary to its consideraion in Parliament and Government 23 years ago is caused by lock of an action plan, the contradiction between tax efficiency and tax fairness, possibility of hasty taxing administration, deficiencies of Irans traditional taxing system and finally being concerned about Vat administrative problems. This paper examines the implementation of a two-step plan for removing the bottlenecks and shortcomings of VAT. In the third step, a modern value-added based taxing system is established. Traditional taxing system triangle in Iran is composed of three defective parts, namely: human resources, i.e. tax audits with the role of policemen, taxing system with traditional and audit-centered facilities and regulation, taxing system with traditional and audit-centered facilities and regulation, and eventually taxpayers with heavy obedience expenditures. This taxing system is inefficient as it has little share in state budget and GDP and it lacks in taxing fairness (redistribution) as well. First Step, Groundwork: in the first step, suitable groundwork should be laid for establishing VAT. Second Step, Stabilization of an overall unified rate: the second step is to administer a pilot VAT system with unified rate: the second step is to administer a pilot simultaneous with collecting direct taxes as pervious in the second year of the plan. This could make an appropriate transfer period for the first step, i.e. establishing a new system for great taxpayers. The next point to the considered in second step is that inflationary tensions should be controlled for stabilizing the modern VAT system. These two steps have many benefits including pilot administration and preparation for total information transparency, extending social fairness and gradually omitting VAT system deficiencies. Third Step, VAT System Establishment: the modern taxing system triangle is composed of taxing engineer (in place of taxing policeman), taxing system (with 10 percent VAT starting from the third year of the plan), and at last taxpayers with little obedience expenditures. Its taxing efficiency is so high that is generally knows as banknote printing press. Moreover, in this system, taxing unfairness could be tackled through combining VAT with negative taxing system and social security.