A Conference on Taxation and Financial Policies was recently held in the University of Tehran and a professor of the same university addressed the meeting. His tone was despairing and complaining of the sheer mismanagement and lack of strong will to implement economic policies and or do long-term surgery on an economy designated by foreign and domestic economists as a patient etherized upon the table. All these economists knew well how to operate on this patient the necessary surgery, but they did not take responsibility and lacked fervor to test their odds of success; they would either be a champion or a detested figure for the operation.
However, Mr. Tayyebnia would not blame his colleagues in the economic terrain, but his cutting edge of criticism excoriates the administrative part of the establishment, a monolithic structure of little flexibility and much less inclination to receive the reforms and allow painful surgeries. The whole system, the minister lamented, “was ignorant of the established facts and the trodden paths which might have saved the country’s economy infested with cronyism, nepotism and monopoly of specific government rentiers and flatterers alike.”
“Rentiers flourishment is a feature of an oil-dependent economy; in such flawed structures, any player who had larger share of the oil-related privileges, will be successful,” Mr. Tayyebnia objected. Taxing system, he believed, was equally beleaguered, no longer working and providing the government and economic authorities scope to act in making meaning of what had been happening in a totally opaque condition. “Tax has always been contributing to economy the least; shocks and fluctuations of oil income still exacerbated the economic woes, where low economic growth and beast of inflation found grounds to roam, with destructive long-term effects,” he lamented.
The minister provided figures of economic growth which would not have been considered as something contributing to the wealth of the nation and their odds of better life; “the economic growth of the last 4 decades averaged 3-3.1 per cent; add to this fluctuations and perturbations of any sort which place Iran on the top of the list of countries with highest economic shocks and fluctuations,” he said.
“The vicious circle of state-owned economy plus low economic growth rate brings in the Dutch disease; these all should be blamed on the oil-based economy where the government is the owner and operator of the economy; research shows that oil shocks and economic fluctuations are closely associated,” Tayyebnia told the meeting. “In a rentier economy, producers have monopoly over the market and do not see it essential to produce finished goods in qualities in par with competitive market products; rather, they seek government opportunities through lobbying in the backstage for more economic privileges; the higher the leverage of cronies of the state, the higher the probability that they secure more opportunities; in such a system, higher economic productivity is no longer considered a criterion of success.”
“In an oil-dependent economy, fiscal policy is a missing part of the puzzle of economic broad picture; during the past 4 decades, the government had been the dominant force in setting the monetary base and had changed it almost single-handedly and capriciously; increasing monetary base also increased government debts to the Central Bank and accordingly, debts of other banks to Central Bank,” the minister contended.
Minister’s lamentations are not unfounded; since long, the malady in Iran’s economy has been too clear to be ignored. Yet, the Establishment, as heavily relied on oil incomes, simplified the economy as selling oil and spending the money, while the patient’s conditions deteriorated, they celebrated an ironically euphoric sense of self-reliance, by the clarion voice of the propaganda.
“The deficit in the budget is usually addressed through decreasing public spending and current costs of the public sector, to have an agile, small, and at the same time, effective and functioning government where it applies only its governance responsibilities, eschewing as far as possible from intervening in the economic process itself,” the minister continued in his criticism of the economic establishment. “An agile government to do this inherent responsibility, it should levy and elicit taxes from the economic sectors and players; oil is a natural wealth and should not be relied upon for the public spending; if a system is to reduce government role, the income should be given to the private sector and be invested in development projects.”
“Sanctions revealed our vulnerabilities and pitfalls in economic management; oil is the major channel through which foreign shocks is transferred to domestic economy, which Resistance Economy has sought to accurately address; the first step in achieving sustainable growth and stability is to bring an order to tax system, without which Resistance Economy would still remain on paper,” he emphasized.
Tayyebnia criticized what he believed was ‘an outdated mode of locating the tax-payer firms;’ “transparency should guide all economic activity and market should work in inculcating this in the players,” he said. “Optimized policies have been prepared by the Ministry with hundreds of hours of expert work; yet what is implemented, violates the very recommendations of the same policy; on the opaque environment where policies are not implemented fully or are distorted, opportunists and rentiers welcome avoiding transparency while they would accept to pay tax in amounts drastic as three-fold or four-fold of the original amount,” he lamented.
Minister criticized the general reluctance in the system and its parts and the sheer administrative inertia when it comes to transparency as the sole savior of the disorganized nature of things; “all measures and calls to fight corruption, tax evasion, and other evils of economy failed and faced lethargy and opposition; even the kind and very persistent contribution of Parliament speaker helped greatly, but the outcome was absolutely nothing; the interest groups and rentiers are the major hurdles and they would achieve anything they want against the government and its dysfunctional systems,” Tayyebnia commented.
Still bitter becomes the rhetoric when the minister touches the very facts of partisan interests which eclipsed national solidarity and the dominant mentality infesting the Iranian social and political scene: parties and individuals seek to maximize their own utilities and short-term interests; “priority should be given to national interests and common good; economy should be intact in any election campaign season and politics should not make decisions for economy and sacrifice it whenever it sees expedient,” he said.
On the question of privatization, he voiced deep concerns that local government officials systematically resisted efforts to privatize government and nationalized industries and firms; his heroic effort, he believed, would even end his career as minister through impeachment in the Parliament, but “I will advance the agenda with full force forward, defying such consequences.”
“The mentality that government should have the full ownership of the economy is hard-wired, and local officials make profit of this mentality, where they oppose the privatization on pretexts as ludicrous as it would generate unemployment; I tell them that they would no longer enjoy their privileges of free-riding on government resources and public treasury; they would no longer receive disproportionate salaries under the general cover of being members of the Board of Directors; they would lose government sinecures which they would lavish upon their relatives while these positions required skills and competence no one of such incumbents ever had, and other corruptions would be prevented should the privatization achieved,” Tayyebnia hit the government section which enjoyed the most of current modus operandi of the system.