Critique of the Government’s Economic Package

In the critique of the government’s economic package

In the critique of the government’s economic package, according to Iran Gate’s report, Ibrahim Raeisi presented a new economic package to the parliament last week, which has faced reactions from experts and economists. This package, titled ‘Production Growth and Inflation Control’, consists of 10 separate axes, which, according to the Minister of Economy, will either strengthen production or control inflation. However, many economic experts believe that this package has no connection to controlling the inflation rate of over 50%.

Ibrahim Raeisi’s government has adopted a new position on economic policies in the face of heavy inflation in the country since late December 2022. It seems that the government became aware of the Supreme Leader’s guidelines for naming the year 2023 during the last days of the previous year and has tried to take actions for a good start. One of these actions is the so-called ‘Economic Growth and Inflation Control’ package. This report focuses on one of the most important parts of this package, which is increasing taxes, and criticizes the government’s claims in this package.

Controlling inflation through higher taxes

According to this package and recent statements made by government officials, the government intends to impose significantly higher taxes on the people. The excuse given by the head of government for this policy is to control inflation through tax measures. The capital gains tax plan, which was recently approved by the parliament, is also explained in this regard, and the government claims that by implementing these resolutions, inflation in the housing and automotive markets will be curbed.

In fact, the government claims that if it can collect more taxes from the people, it will also have the ability to control inflation. But is such a claim true? Has any country in modern world history resorted to tax measures and increased taxation on the people to control inflation? These questions will be answered further.

Taxation is reasonable but unrelated to inflation control.

Tax tools are used in all economic structures of developed countries as the best way to cover government expenses. Additionally, these tools are used in welfare state structures as a lever to reduce income inequality. However, in no economic system, the anti-inflationary effects of tax collection in markets are mentioned, nor is there any successful or unsuccessful experience of implementing such a policy in markets available.

Now, the government claims that it intends to control prices by using tax tools in housing markets and even consumer goods, and to combat inflation. As mentioned, such a mechanism is not only undefined, but even socialist systems, which are leaders in economic intervention, have no such experience.

Covering budget deficits through extreme price polarization in society

Based on the provided explanations, it can be said that figuratively speaking, Ebrahim Raisi’s government’s spoon has reached the bottom of the pot, and it intends to cover its current expenses by imposing maximum taxes on various income groups. However, due to concerns about the reaction of society, it has tried to portray the situation in a deceptive and misleading way, pitting low-income groups against the middle class and the wealthy, so that if there is any protest against the regressive tax by the market, the government can suppress the protests by justifying its intention to control inflation through this method.

In fact, Raisi’s government has adopted the same approach in the economic field as it has in the hijab issue. As mentioned, this policy will create the grounds for polarizing society. In essence, the government intends to cover its current expenses by confronting low-income groups with the middle class in terms of imposing maximum taxes.

Double-edged tax for monopolists

However, the point that Ebrahim Raisi and his government do not pay attention to is that taxes are known worldwide as a tool that democratically empowers society. This is because society expects maximum accountability for the expenses it pays from its pocket. This policy, after implementation, not only benefits the privileged classes but also, after a short time, includes low-income and vulnerable groups in the ranks of those demanding accountability from the government. This is because, after a while, the way taxes are spent by the government also creates ambiguities and doubts for the general public.

That is why it is said that the tax tool will be a double-edged sword for dictatorships and monopolistic rulers. On one hand, taxes can be instrumental in funding government initiatives, but on the other hand, they can make society more demanding and dynamic.

However, President Ebrahim Raisi, with the performance he has shown in the past two years, will naturally face difficulties in bringing about such a transformation in society and will not be able to satisfy the various sectors’ questioning. Consequently, he will inevitably resort to suppressing demands. This is why economists believe that the state tax policy may yield maximum benefits for the government in the short term, but by using tricks such as calling it anti-inflationary, one cannot escape the social and political consequences of this policy.