2017 budget, increasing share of oil revenues and military spending

According to parliamentarians, the share of oil revenues in next year's budget has increased by 10 percent, and the largest changes have been made in the oil and gas revenues sector. In the overall budget bill for next year, the share of the defense budget has increased by 21 percent.

The general outline of the 2017 budget bill has opponents and supporters in the parliament. Opponents who ask why the share of oil has increased significantly compared to the 2016 budget. On Monday (February 20), Hossein Ali Haji Deligani, a representative from Shahin Shahr, said in opposition to next year's budget: "In the 2016 budget, the share of oil was 25 percent; but in the 2016 budget, this share has increased to nearly 35 percent, which is contrary to the macro policies of the resistance economy."

One of the most important reasons for the increase in the share of oil revenues next year is the increase in Iranian oil exports after the JCPOA, as well as the occasional increase in oil prices compared to previous years. Although the policy of resistance economy is one of the slogans that Ayatollah Khamenei emphasizes, it is not clear with which levers this slogan should be implemented and what consequences it will have for the Iranian economy.

In today's session of the parliament, the Shahinshahr representative criticized the method of financing the 2017 budget, saying, "Borrowing in the 2017 budget is very worrying." He considered this trend in recent years to be "very dangerous" and said that the government plans to borrow about 45 trillion tomans.

He also mentioned tax evasion and said, "Tax growth is 9 percent, but it seems that our economic growth is half of this number, so we will see a continuation of the recession; in the 2016 budget, there is no clear intention to collect taxes from those who have evaded taxes, and more pressure will be placed on those who are already paying taxes." According to him, a group that imports under the guise of production and in the name of production "are evading taxes."

Government tax policy and its bottlenecks

The government has prepared and submitted the budget outline to the parliament while, according to the Iranian Minister of Economy, the debt of the government and state-owned companies is estimated at around 600 to 700 trillion tomans. Ali Tayebnia, in a speech at the Iranian Chamber of Commerce in the last days of January of this year, said that the government's conditions have been very difficult in the past three years.

In a speech he gave in January of this year, referring to the government's financial constraints, Economy Minister Hassan Rouhani said, "We all believe that one of the problems of our economy is its dependence on oil, and our inflation is due to the economy's dependence on oil. If we want to fix this situation, we must definitely cut our dependence, and this can be achieved by increasing tax revenue."

But the government does not seem to be able to collect taxes from the institutions and organizations that control a large part of the Iranian economy; institutions affiliated with the main centers of power, such as the Velayat-e-Faqih, Astan Quds Razavi, and the Revolutionary Guard. Many companies owned by these institutions are either exempt from paying taxes, like Quds Razavi Province, or evade paying taxes under various pretexts.

For this reason, the Minister of Economy has acknowledged that the government's tax revenues are not very stable: "Unfortunately, taxes are not collected fairly, and the share of different sectors in taxes is not proportionate, and there are many unreasonable tax exemptions in the country, and all of this pressure is placed on industry and transparent economic sectors."

With this description, it is unclear what resources the government should rely on to implement the "resistance economic policy" and on whom else to place its burden, other than the people.

Increasing the defense budget

The overall budget plan, however, has its supporters. Among them is Representative Garmsar, who defended the budget plan in this meeting and pointed to “special attention” in next year’s budget to cities and provinces, which, according to him, “have increased their appropriations for regional development and balance by 40 percent compared to this year.” But this is not all of the budget allocated to military issues.

After the government submitted the budget bill to the parliament in December of this year, Mehr News Agency reported an 86 percent increase in the budget of these institutions by comparing the budget of military institutions in the next year's bill and the first year of the Rouhani government's rule.

The largest budget increase is related to the IRGC budget. The IRGC's joint budget in the 2017 budget bill is projected to be 22,245 billion Tomans, which is a 100 percent increase compared to 1993, the first year of the government of prudence and hope.

The budget of the Joint Staff of the Army has grown by 40 percent, reaching 7,772 billion tomans in next year's bill. The budget of the General Command of the Armed Forces and the budget of the Basij Organization for the Oppressed have also doubled in the same period.

Other sections

Gholamreza Kateb predicted an economic growth of 6.7 percent, investment growth of 12.3 percent, inflation rate of 7.3 percent, and liquidity growth of 20 percent in next year's budget. He estimated the increase in the share of tax revenues in next year's budget at 14 percent and said:

"Fortunately, tax revenues have increased from 86 trillion tomans to 99 trillion tomans, which is a 14 percent increase compared to the 2016 budget. Of course, this increase in oil revenues is for state-owned companies, and fewer taxes are deducted from the public."

According to him, the defense budget has increased by 21 percent in the next year's budget compared to 2016. The parliamentarian added, "Given that we are currently in a state of recession and crisis and the functioning of the National Development Fund is also in a state of crisis and recession, we have allocated $1.3 trillion from this fund to strengthen defense capabilities."

According to the MP, other budget sectors include a 33 percent increase for the environment and the allocation of 1,440 billion tomans from the value-added budget to the sports and youth sectors. He also said that "for the first time, 1,000 billion tomans has been allocated for investment in the employment sector, which we believe is still not enough, no matter how much we help this sector."

Source: DW