Iran Suspends Sales Tax Amid Merchants' Strike

by Lorys Charalambous, Tax-News.com, Cyprus

13 October 2008

Iran has been forced to postpone the introduction of an unpopular sales tax after merchants protested against the measure by refusing to open their shops.

The reaction to the new tax was led by the country's goldsmiths and centred on the city of Esfahan, where the central bazaar, the city's business hub, remained closed for two days earlier this week.

The merchants are objecting to the new 3% tax on sales receipts, which they argue will only harm an economy already made fragile by high inflation and falling oil prices.

President Mahmoud Ahmadinejad counters that the tax is an essential part of the government's tax and economic reforms as it attempts to modernise its outdated systems and counter the effects of falling oil receipts, which make up 80% of the government's revenues.

However, after meetings between representatives of the gold trade and the Iranian government, it was agreed that the introduction of the sales tax, which took effect in the last week of September, would be postponed by between two and six months.

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