The recession in the housing market and the loss of demand for new construction in Tehran has led to lower income for the municipality of Tehran.
This recession can also have a negative impact on the cash resources of the municipality in the upcoming year.
“The total budget for the current fiscal year (March 2016-2017) has been 178,000 billion IRR ($5.5b), where 60% of this budget is cash and 40% is from non-cash sources. In the first 6 months, 41% of the budget was collected, which is less than expected. It has been forecasted that by end of the year a total of 158,000 billion IRR ($4.8b) will be collected”, said Alireza Dabir, Head of the budget and planning commission of Tehran City Council.
The municipality is approved to earn 62,000 billion IRR ($1.9b) from taxes relating to sales of licenses for excess densities and change of land usage in the current fiscal year, which is 15% lower than that of last year.
Another source of financing for the municipality is value added tax. Currently Iranians pay 9% VAT of which 3% has gone to the municipality by the end of March 2015.
Few years ago, the Government changed the regulation of VAT payment to the municipalities; now the budget is payed to the provinces, which divide it between cities and towns management organizations. This has decreased the direct income of municipalities.
Mehdi Chamran, Head of the Tehran City Council, considers VAT-share as one of the sustainable sources of income for the municipality: “One reason for the reduced sustainable income of municipalities was that large cities were expected to receive 20% and small towns and villages were expected to receive 10% of VAT. However, due to the policy of supporting villages and small towns, large cities only received a 12 percent share”.
“Over the last years, the Tehran municipality has faced problems due to the recession in the housing and construction markets and reducing one of their sustainable sources of income will only make the problem more severe”, concludes Mr. Chamran.
Source: Tehran City Council Official Reports