Golan currency traders in the absence of capital gains tax
According to Iran Economist, in recent days, the currency market has been inflamed again the price All kinds of currencies have increased these days. To find a solution to the problem, first of all, the reasons for this phenomenon should be investigated. In this regard, we will examine some propositions.
* Has the supply of currency decreased?
To answer the question of whether the supply of currency has decreased or not, we must first examine the flow of currency inflows and outflows. In the first 7 months of this year, the amount of non-oil exports of the country was 28 billion and 406 million dollars. In addition, the export of oil and oil products in the first 7 months of this year was at least 15 billion dollars. On the other hand, the import of the country in the 7 months of this year was 31 billion and 727 million dollars. Therefore, the trade balance of the country in the 7 months of this year, including oil, has been positive by about 12 billion dollars.
On the other hand, according to the statistics announced by the Governor General of the Central Bank, the amount of currency supply in the Nima system from the beginning of the year until yesterday, about 26.5 billion dollars have been traded in the Nima system, and compared to the same period last year, 67% in the mentioned system in the supply We had growth deals.
Also, the total supply of foreign currency for the country’s imports in the mentioned period was equal to 38.5 billion dollars, which has grown by 22% compared to the same period last year. In the field of banknotes, the volume of banknote transactions was 1.5 billion dollars, which is a 40% growth of banknote transactions compared to the same period last year. Therefore, there is no problem in terms of currency supply.
* Iran’s economy does not have excess liquidity / Iran’s GDP is 27% more than liquidity
One of the statements that is heard a lot is the high volume of liquidity in Iran’s economy. What is the measure of liquidity volume? The criterion of evaluation and measurement in terms of economics is the ratio of liquidity to GDP.
According to the latest statistics of the Central Bank, the gross domestic product at current prices in the year ending 1400 was equal to 6,677,000 billion Tomans, while at the end of the same year, the volume of liquidity was 4,832,000 billion Tomans. Therefore, at the end of last year, the ratio of liquidity to GDP is 72.3%. In other words, the volume of liquidity in Iran’s economy is 27.6% less than the GDP. Therefore, Iran’s economy is not facing a liquidity surplus.
Interestingly, based on the latest statistics central bank At the end of August, the volume of liquidity has reached 5,400,000 billion tomans, which, despite the passage of 5 months since 1400, has not yet reached the level of the gross domestic product at the end of 1400. Of course, it should be noted that in the first 5 months of this year, the level of gross domestic product has naturally grown at current prices and has definitely exceeded 7700 thousand billion tomans. In this case, the ratio of liquidity to GDP is about 70%.
* The share of money in liquidity at the average level of the last two decades
Another point that is considered in the field of liquidity is the composition of liquidity. Sometimes some experts say that the speed of movement of liquidity and deposits in Iran’s economy has increased and this has caused the price increase in the market of assets such as housing and currency. Actually If the share of money in the total liquidity increases and the share of quasi-money decreases, it means that the liquidity of money has increased.
Liquidity includes two components: money and quasi-money. According to the latest statistics of the Central Bank of monetary variables in August 1401, the share of money in the total liquidity is 22.5%, pseudo-money is 77.5%. Also, the ratio of money to quasi-money is at 29%.
Therefore, firstly, the ratio of money to total liquidity is within the limits and long-term range of Iran’s economy in the past years, and secondly, the ratio of money to quasi-money in most developed countries is much higher than the ratio of 26.9% in Iran’s economy. Besides, the ratio of money to quasi-money in developed economies is at the level of 40 to 45 percent.
* The proposal to remove the currency quota with the national card is repeating the mistakes of 1999 and 1400
Some people referring to the misuse of the quota of 2 thousand euro They recommend that the central bank remove the currency quota with the national card. In order to check the results of this recommendation, one should first review the experience of removing this currency quota twice. At the beginning of the second half of 1999 and in November 1400, the central bank removed the currency quota with the national card. The result of this action in both times was only an increase in the exchange rate.
But why remove the quota of 2 thousand euro Currency increases the exchange rate. The first reason is the psychological effect of this action. When the currency quota is removed with the national card, the message to the people is the currency limit. This issue raises the demand for currency trading. The second reason is that the demand for currency goes from the official market to the unofficial market. According Because it is possible to buy foreign currency outside the official market, the demand for foreign currency goes to the informal market. As a result, the official market will decline and the informal market will flourish. With the flourishing of transactions in the informal market, Actually The command of the foreign exchange market is transferred from the hands of the central bank and the official sector to the informal sector, and the informal market easily increases the exchange rate to earn more profit.
* Intensification of currency supply is a temporary and costly solution
One of the repeated actions of the governments and the central bank in different periods is to intensify the supply of currency to manage the currency market. Governments have always forced central banks to increase the supply of currency, but the experience of the 90s has shown that the asset market does not reach equilibrium with an increase in supply, and if the increase in prices stops for a while with the increase in supply, the upward trend will resume once the supply stops or decreases. takes over In other words, the more the asset market is supplied, the more thirsty the market will be.
In 1990, the central bank released 47 billion dollars of foreign currency to the market, but the price of currency went from about 1,000 tomans to 1,300 to 1,400 tomans, and in 1991, due to the decrease in the supply of foreign currency, the price of currency went up to 3,200 tomans. In 1996, the central bank injected 18 billion dollars into the market, but the price of the currency increased. In 1997, the government decided to supply 4,200 tomans currency for all demands, and within a few months, billions of dollars of currency poured into the market, but the price of currency in the market rose again.
* The currency market is in the oven of inflationary expectations and traders’ Golan
Some experts believe that the reasons for the increase in the exchange rate are correct, that part of the increase in the exchange rate is normal due to inflation in Iran’s economy, but in many cases, a large part of these growths is due to speculative activities in the market, which has blown in the furnace of price increase and all the economy and thoughts has made the public aware of the developments of this market.
With this account, why has the currency market been faced with an increase in price and inflammation in recent days? The answer should be summarized in one sentence: “Expecting price increases and the formation of speculative and investment demand in the market.»
In the 1990s, Iran’s economy suffered more from speculation in the asset market than from monetary policies or the growth of liquidity, and the main lever of inflation in these years was the asset market.
*Stable control of the currency and property market by levying heavy taxes on the income of dealers and traders
In many countries, demand side control policies are used to manage asset markets and control and direct liquidity. Controlling the demand side does not mean currency rationing and not allocating currency to certain expenses and such cases, rather, the demand for currency is managed by using tax tools, because basically tax is more than a revenue tool for the government, it is a tool for managing the economy.
Markets such as currency, gold, housing and automobiles, which always have speculative demand in addition to consumer demand, should be taxed on capital gains and the profits from transactions in this market should be destroyed with heavy tax rates.
In most economies, the asset market is managed with tax instruments. When the government doesn’t want capital owners to enter the property market to earn profit, instead of taking and closing, they use the method of levying heavy taxes on transactions and income from transactions in these markets. The amount of tax determined on these incomes is so high that it destroys the motivation of capital owners to stay in this market.
* Pumping inflation into the economy from the property market is the biggest damage of the lack of capital gains tax law
But Iran’s economy does not have a tax base on capital gains, so that dealers can easily get rich profits in a short period of time by entering the property market and buying and selling housing, land, currency and gold. The sharp increase in prices in the property market, especially the exchange rate, causes inflation from the property market to the entire economy and involves all sectors and economic activities. Therefore, it can be said that in some periods, especially in the years in addition to monetary policies, what has been very effective on inflation has been speculation in the asset market and pumping inflation from the asset market to the entire economy.
Pumping inflation from the property market to the entire economy causes an increase in the cost of production on the one hand and a decrease in the lending power of the banking system on the other hand, because the lending power of the banking system does not grow as much as the increase in costs, and this problem makes banks face credit and liquidity crunch. he does.
* Capital gain tax plan in the turn of the public floor of the parliament
The economic commission of the parliament has compiled the capital gains tax plan and sent it to the public forum of the parliament, but the committee of the speaker of the parliament, which is facing a lot of plans and bills, has not prioritized this very important plan.
* Determining a maximum rate of 35% for tax collection in the capital gains tax plan is not a deterrent
Examining the text of the capital income tax plan shows that it is an expert work are you well It has been done on this plan and many strengths can be seen in it. One of the strengths of this plan is the requirement to electronically register and issue invoices for all transactions, including transactions in the property market. It is only in this case that the government can levy a heavy tax on accidental and speculative incomes in the property market.
But one of the weaknesses of this plan is the low tax rates on speculative activities. According to the text proposed by the economic committee of the parliament, the highest rate of capital gains considered in this plan is 10% higher than the rate set in Article 131 of the direct taxes law. This means that the highest capital gains tax rate will be 35% if an asset is sold less than a year after its purchase.
Now the question is, when some dealers and traders place their inflation expectations in high and unknown limits, so that the experience of Iran’s economy has shown that in a period of one or two years, the price of currency and housing It has also grown by 100%, what effect will determining the rate of 35% have on controlling speculation in the asset market?
* The incentive to speculate in the currency market should be eliminated by imposing heavy taxes
The problem is that one should not imagine a special income for a trader in the currency, housing, gold and car markets. If believe We are not interested in making money for traders, so the maximum rate set for capital gains tax in the plan of the Economic Commission of the Parliament should be around 80-90% of the total MabeThethe difference The rate of purchase and sale of assets should be considered in one year. The incentive to speculate in the asset market can be eliminated only if the major part of the profit of the speculator is taken from him as a tax. Otherwise, the 35% tax will only share the government’s profits with the merchant.
If the members of parliament are worried about the currency market and the high prices of the housing market, instead of trying to make speeches before the order, they should put the capital gains tax plan on the agenda as soon as possible and set heavy tax rates for dealers in the currency, housing, and gold markets. and cars, prevent the destruction of Iran’s economy by these few people.
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