Traders in traditional bazaars, one of the most powerful lobby groups, closed their shops for two days in protest at proposed taxes.
Iran's powerful merchants flex their muscles
TEHRAN // Gold and textile merchants in Tehran's Grand Bazaar yesterday ended their strike in protest at proposed tax increases after what is believed to have been intensive behind-the-scenes lobbying between the representatives of their guilds and government officials.
The officials have not given any details about the agreement that ended the strike in the city's trading hub. Guild representatives have also kept silent on the issue. Merchants in traditional bazaars constitute one of the country's most powerful political interest groups. Yesterday all the shops in the bustling market in the south of Tehran, which is more than 10km long, were open after a two-day public and religious holiday.
The bazaar's goldsmiths and textile merchants closed their shops and stalls last Tuesday, and despite an emergency meeting between guild leaders and government officials, refused to open them until today. The merchants, who were joined by other guilds including carpet traders as well as some merchants in the bazaar of Tabriz, the fourth largest city in Iran, had threatened to continue their strike yesterday until they had the government's written assurance that the taxes were going to be reduced.
The strike came in response to media reports that authorities planned to increase the sales tax by up to 70 per cent. Iranian officials quickly promised to keep the rate at its 2008 level of around 15 per cent, state media reported. "The merchants seemed very determined. Only extensive lobbying, and maybe some intimidation from the government to confront the strike as a politically motivated act and collaboration with the opposition, could have brought this strike to an end," a businessman with close contacts in the bazaar, who declined to be named, said.
Wholesalers and retail shop owners in the bazaar complain about slow sales and blame them on the international and domestic recession. Because of the dire economic situation taxes should not be raised, they said. "You cannot ignore recession when newspaper headlines say there are bounced cheques [worth] four billion dollars [in one year]," Mohammad Tahanpour, who heads the union of home appliance traders, was quoted by ISNA as saying.
He also said many shops were being forced to close because traders could no longer afford the rent, yet "the tax office is using a language of force and pressuring business-owners" to pay higher taxes. There are more than 2.6 million trade businesses in Iran. According to the head of the National Tax Administration, Ali Asgari, the share of these businesses in gross domestic production is 30 per cent. "But they only pay six per cent of all taxes...Their share is much less than the others," he was quoted by Donyaye Eghtesad newspaper as saying on Wednesday.
During the recent strike opposition websites such as Jaras reported clashes between striking merchants and security forces who tried to force them to open their shops. Jaras also claimed that a representative of the textile merchants' guild had been arrested on Wednesday when calling other merchants to stage a rally on Thursday. According to another unconfirmed report on Jaras, a textiles merchant was stabbed by plainclothes security officers in his shop on Tuesday and later died in hospital.
Some observers, however, say the strike had more to do with fears of increased government oversight than any new taxes. The bazaaris, as the merchants are known, were motivated by their desire to keep tax officials from prying into the sources of their merchandise when inspecting their accounts and records for taxes, businessmen familiar with the merchants' practices say. "Other businesses pay tax too but they don't protest so much. The turnover of these businesses is really high so paying their taxes to the government mustn't be such a matter of death or life to them to risk the consequences of a strike. Paying tax can't be their only problem," a businessman who declined to be named said.
"Most of the gold and textiles traded in the bazaar, and consequently in the country, are smuggled from abroad. I suspect that a lot of money laundering may be involved in these businesses, too," he said. "They just want to show their power and make tax officials stay away from them". In October 2008, gold and jewelry merchants in the bazaars of Tehran, Isfahan, Tabriz and Mashad staged the first ever bazaar strikes since the Islamic revolution of 1979 in protest at the introduction of a three per cent value added tax. The strike lasted for several days and was ended after President Mahmoud Ahmadinejad personally intervened and ordered the collection of the tax to stop.
The Tehran bazaar played a significant role in the Islamic revolution of 1979 by offering financial support to revolutionaries and a bazaar strike that spread throughout the country is said to have been a major factor in the downfall of the Shah's regime. The bazaaris are generally very religious and a stronghold of hardliners. The opposition was dismayed last summer when the conservative bazaaris failed to support protesters on the streets by closing their shops during the post-election unrest.