Iran General NewsTax delay fails to quell Iranian protest

Tax delay fails to quell Iranian protest

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ImageNew York Times: A strike in Iran’s traditional bazaars expanded on Sunday despite an order by President Mahmoud Ahmadinejad to suspend a new tax on sales that ignited the protest more than a week ago.

The New York Times

By NAZILA FATHI
Published: October 13, 2008

ImageTEHRAN — A strike in Iran’s traditional bazaars expanded on Sunday despite an order by President Mahmoud Ahmadinejad to suspend a new tax on sales that ignited the protest more than a week ago.

The main entrance to the Grand Bazaar in Tehran was closed, as major traders like carpet and textile merchants joined the jewelers, who had started the strike in Tehran. The strike continued in the traditional bazaars in several other large cities, including Isfahan, where it erupted first on Oct. 4.

In the latest sign of discontent with Mr. Ahmadinejad’s economic policies, the merchants went on strike to protest being included in the country’s first value-added tax, a 3 percent charge on all products except basic commodities like dairy products and bread.

In an effort to persuade the traders to end their strike, Mr. Ahmadinejad said last week that the new tax law would be suspended for two months. But the newspaper Sarmayeh reported on Sunday that the traders had demanded that the law be permanently revoked.

Bazaars are the backbone of the country’s traditional economy. The merchants wield significant power, and this is the first time since the 1979 Islamic Revolution, in which they helped overthrow the shah, that they have protested on so large a scale.

Carpet merchants in Tehran’s bazaar closed their shops in unison, even though their sales are exempt from the tax. Shutters were lowered and there was no sign of the usual bustle.

Police officers were stationed in the bazaar on Sunday, and despite their request, traders refused to open the shops, said one carpet merchant, who spoke on condition of anonymity for fear of retribution.

The few shops that had opened early in the morning were attacked by angry sellers and were forced to close.

“Paying taxes is not in the culture of traditional traders,” said Behrouz Hady Zonooz, an economics professor in Tehran. “In the meantime, the traders’ guilds are powerful, and they can turn an economic demand into a political one.”

Last year, Parliament approved the tax in an effort to increase the government’s revenue and make the traditional trade more transparent. The government began enforcing the law in late September, at a time when the annual inflation rate was hitting 30 percent and traders were frustrated by a decline in sales. International sanctions were also taking their toll.

“Merchants do not want to pay sales tax,” said the carpet seller who declined to be quoted by name. “There has been little trade in the bazaar since March because of the inflation. We cannot import or export anything because of bad relations with most countries and economic sanctions. And the government is increasing the pressure by enforcing new regulations every day.”

The United Nations Security Council has imposed economic sanctions on Iran for refusing to halt its nuclear program. As a result, businesses must pay more for imports and cannot move money at major international banks.

Meanwhile, traditional traders at the bazaar have resisted modernization and greater transparency, lest they be further exposed to taxes and government regulation.

The bazaar guilds wield great power. Different trades have their own guilds, which set import and export rules and price regulations. They have an efficient network to mobilize the merchants and enforce their decisions.

After the revolution, many influential traders had positions in the government, and the government counted on the bazaar as a powerful ally.

Beyond the value-added tax, many analysts saw the strike as a reaction to Mr. Ahmadinejad’s economic policies, which have been blamed for a surge in prices and a drop in sales.

Mr. Ahmadinejad, who faces an election next spring, caused anger, and some rioting, last year when he rationed gasoline and increased its price in an effort to curb consumption.

He has stopped government subsidies to many manufacturers, like food and detergent producers, which has led to increases in their prices.

He has vowed to cut the subsidy for energy and other basic commodities and redistribute the money as direct payouts to citizens, though economists have warned that doing so would cause even higher inflation.

Sarmayeh published an analysis on Sunday that said the rift between the government and the bazaar suggested mistrust of government economic policies from different sectors of society.

“Even the affluent section of society feels threatened,” the newspaper quoted Saeed Madani, a sociologist and university professor, as saying. Mr. Madani was referring to rich traders who have joined the strike.

“This is a sign of economic and social chaos resulted by the government’s policies,” he said, according to the report. “No one feels safe in a situation where there is recession, inflation, unemployment and economic crisis. All traders feel threatened.”

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