Iran earns more from tax than oil for first time in almost 50 years

Iran, in almost 50 years, has earned more from tax than oil as President Hassan Rouhani’s economic strategy of significantly reducing Tehran’s dependency on oil starts to bear fruit. The country has shifted its traditional reliance on crude to taxation revenues in the face of plummeting oil prices.

President Rouhani’s economic strategy is to significantly reduce the government’s dependency on oil and instead collect tax more systematically, according to Ali Kardor, the deputy managing director of the national Iranian oil company (NIOC).

“For the first time in 50 years, the government’s share of the oil revenue is less than what it is earning from tax, including VAT,” Kardor said on the sidelines of the second Europe-Iran forum in Geneva.

“Only around 10 percent of Iran’s GDP is currently dependent on oil.” Almost 20 percent of oil income goes into a sovereign wealth fund, which is reserved for development purposes.

Iran’s oil revenue took a heavy toll in recent years from the oil embargo imposed on Tehran by the EU and US over its nuclear programme and lately because of falling global crude prices. Sanctions are expected to be lifted when the UN nuclear watchdog verifies Tehran has taken the necessary measures to roll back its nuclear activities as outlined under the landmark nuclear agreement struck in July.

Kardor said NIOC would offer a set of new lucrative contracts to foreign investors, worth more than $100bn, for about 45 potential onshore and offshore fields by November.

“We currently produce 3m barrels of oil a day, of which 1.3m are exported but we expect that to increase to 2.3m in May or June next year,” he said.

Years of financial stringency under international sanctions have contributed in forcing Iran to find a way to reduce its reliance on crude, he said. “This is a positive development for Iran, for the more tax people pay, the more accountability and responsibility they will demand from the government.”