Some Truths About Iran`s Business

Posted on Posted in Business Guidelines

Economic Freedom Snapshot

  • 2016 Economic Freedom Score: 43.5 (up to 1.7 points)
  • Economic Freedom Status: Repressed
  • Global Ranking: 171st
  • Regional Ranking: 14th in the Middle East/North Africa Region
  • Concerns: Rule of Law, Open Markets, and Regulatory Efficiency
  • Overall Score Change Since 2012: +1.2

As a direct result of political oppression and deficiencies in the legal framework, the rule of law remains fragile. Efforts to enhance the business climate have been modest and occasionally undone to maintain the status quo. The private sector remains marginalized.

RULE OF LAW

The semi-state establishments have control upon tax-exempted foundations that dominate many economic sectors in parallel with public sector. Last year in early months of 2016 parliament passed a law which emphasized semi-state establishments should pay tax from then on, which shows a movement toward clearness in economy.

 LIMITED GOVERNMENT

The top personal income tax rate is 35 percent, and the top corporate rate is 25 percent. All property transfers are subject to a standard tax. A value-added tax has been collected intermittently. The overall tax burden equals an estimated 5.8 percent of total domestic income. Government spending amounts to 15 percent of GDP, and public debt equals 12 percent of GDP.

 REGULATORY EFFICIENCY

The regulatory environment remains restrictive, severely constraining private economic activity. Labor market rigidity exacerbated by state interference continues to discourage dynamic job growth. In 2015, the government was forced to make significant cuts in subsidies, not as part of an orderly and enlightened liberalization plan to make structural reforms but because of sharply lowered oil revenues.

OPEN MARKETS

Iran’s average tariff rate is 15.2 percent. Customs delays impede trade. Foreign investment is subject to governmental screening and sectorial restrictions. Despite removing International sanctions, there are still limits to trade and investment but conditions tend to get better. Strict governmental controls limit access to financing for businesses. State-owned commercial banks account for a majority of total banking-sector assets, and credit allocation is directed by the government.

 

FAR Law Firm

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