Iran Accuses Foreign Employees Of Tax Violations

by Lorys Charalambous, Tax-News.com, Cyprus

17 January 2011

Swedish cosmetics firm Oriflame Cosmetics has announced that the last of the five employees who were arrested and imprisoned by Iranian authorities in August has now been released. Local media had reported that the firm's employees were suspected of violating tax regulations.

The company’s operation in Tehran was closed by the authorities in August and the three members of its staff and two sales consultants were detained. The company said at the time: “Iran represents some 20% of the sales in the Asia region. Despite the development in Iran, Oriflame confirms the Group's outlook for 2010 in regard to sales, whereas the operating margin, due to potentially lost sales in Iran, is now expected to be around 12% for the full year (earlier communicated to be above 12%). In addition, a definite closure of the operations in Iran may lead to extraordinary costs in 2010 of approximately EUR10m”.

According to the 2011 Index of Economic Freedom, which has just been published by the The Wall Street Journal and The Heritage Foundation, heavy state interference in many aspects of private economic activity "has resulted in economic stagnation in Iran’s non-oil sector and a serious lack of overall economic dynamism. A restrictive business and investment environment continues to hamper private-sector development."

“More than 500 companies remain state-owned, and privatization has been negligible in the past year. Business licensing and closure are regulated heavily by an intrusive and inefficient bureaucracy. High tariff rates and non-tariff barriers undermine overall economic efficiency. Corruption is rampant, and fair adjudication of property rights cannot be guaranteed. The judicial system is vulnerable to political influence and lacks transparency”.

The Index reports that Iran has a relatively high income tax rate and a moderate corporate tax rate. The top income tax rate is 35%, and the flat corporate tax rate is 25%. All property transfers are subject to a standard tax. A value-added tax, collected intermittently since 2005, was officially re-implemented in 2008. In the most recent year, overall tax revenue as a percentage of GDP was 6.1%.

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