South Korea, Malaysia, India, Turkey
The role of
export earnings has become much more pronounced in the context of the
recession that dominates the country’s economy.
Chairwoman of Investment Committee of Iran Chamber of Commerce, Industries,
Mines and Agriculture, believes export promotion is one of the most important
pillars of economic development. Most countries pay special attention to the
issue and try different ways by providing infrastructure and offering various
incentives and concessions, including tax breaks to encourage exports because
exports stimulate economic growth and development and can have positive
In the current
downturn, some manufacturers have inevitably left the economy and stopped
working. Many other manufacturing units, on the other hand, are operating at
lower capacities and are struggling to survive. Therefore, companies that have
been able to stay competitive and continue to operate have to deal with many
problems and need assistance. But in the meantime, the government’s 1399
budget bill (2020/21) has raised concerns for exporters. In the budget bill
under Note 6 mention is made of duties and tax refunds as well as zero rates
and tax exemptions from exports, which are the concern of many exporters and
need to be reformed.
In this section
of the budget, duties and tax refunds are subject to the Central Bank of Iran
(CBI) regulations. One of the shortcomings of the CBI circular is the 4-month
deadline set for the return of the foreign currency fetched from exports.
Given the difficulties and constraints posed by the sanctions and recession,
exporters face many problems in this regard.
Export procedures have been prolonged because
one commodity may reach destination after going through several other
destinations which means it takes longer for the client to receive his goods.
On the one hand, due to financial sanctions, foreign customers face
restrictions in paying for the goods. In addition to the delay in handing over
the goods the exporters face higher risks, reduce their bargaining power and
foreign clients demand more time to return the money in installments.
All these conditions make it very difficult for
the exporter to return the foreign currency he earns from exports within the
set deadline and require a thorough review. Another important issue that is
directly related to the return of foreign exchange is the Forex Management
Integrate System known as NIMA, which is not determined by the mechanism of
actual supply and demand of the foreign currency. While the exporter has to
purchase some of its raw materials at the open foreign exchange rate, its
export currency falls below this value, which discourages the exporter from
hastening the return of its export currency.
The producer is not like a speculator seeking to
profit from fluctuations, but his main concern is the production cycle and
filling the production capacity and focusing on the production and sale of the
product. Therefore, the exporter tends to return the export currency to the
country because he needs liquidity to produce, and this export revenue can
flow through the blood vessels of the company and enable it to continue
The role of export earnings has become much more
pronounced in the context of the recession that dominates the country’s
economy. But with the mechanism in place, the tendency of the exporter is
reduced. In order to increase the exporter’s willingness to export and return
the resulting foreign currency, we must trust the mechanism of forex supply
and demand and allow the market to determine the price.
As the foreign exchange rate approaches this
equilibrium, the flow of export currencies into the country has accelerated,
so if the government wants to return the export currency into the country’s
economic cycle it should know that the exporter is much more eager than the
government, but this important task should be fulfilled in a just mechanism.
As a result, if the forex rate moves towards liberalization, the export
currency will return to the country more easily and quickly, and there will be
no need for any special measures that could provide the basis for corruption.
Looking at the
experiences of successful exporting countries in tax policy, South Korea and
Malaysia are actively abolishing and reducing taxes that somehow affect export
spending and revenue, while in Turkey and India, where most of the government
revenues come from taxes, they have been partially and selectively reduced by
In the Iranian economy, where the government
budget relies on oil sales, given the recent restrictions imposed by the
sanctions and the government’s move to become independent of oil revenues, the
more appropriate model is to offer gradual export discounts slantwise and
reduce them gradually.
This will enable the government to prepare the ground for encouraging
exporters to join the world market, and by gradually reducing these
exemptions, to increase government revenue from taxation and independence from
oil revenues, and for the exporter to improve his competitiveness. Therefore,
the government policies must be in line with support for the exporters. Under
the difficult economic conditions exporters are facing, the government should
not count on the revenue from taxes and duties on exporters.