Discussions on fiscal transparency were held in Tehran during June 17-29, 2002. The staff learn, comprising Messrs. Gupta (head), Desai, and Lienert and Ms. Corbacho (all FAD) met with the Minister of Finance, his Deputies and officials from the Ministry of Economic Affairs and Finance, the Management and Planning Organization, the Central Bank, the Audit Organisation, the Social Security Organization, die National Iranian Oil Company, the Budget Committee of Parliament, and Bonyad Mostazafan va Janbazan.
The IMF Manual on Fiscal Transparency http://www.imf.org/external/np/fad/trans/manual/ should be consulted for further explanation of the terms and concepts discussed in this report.
For the SSO, contributions are: 20 percent by employers, 7 percent by employees and 3 percent by government. The other main pension funds to which die government contributes are for civil servants and for the army.
The SSO, bonyads, and municipalities are classified as “nongovernment public institutions.” This terminology is inconsistent with GFS, which would classify die SSO and bonyads (to the extent that they are holding companies) as “nongovernment public corporations” and municipalities as “general government.”
These councils prepare provincial medium-term development plans and annual provincial budgets, consistent with national plans; propose ways to acquire new sources of income; review development and recurrent budget expenditures; and present quarterly financial reports to provincial committees.
Article 123 of the Constitution states that “the President is obliged to sign legislation approved by the Assembly …after the legal procedures have been completed and it has been communicated to him. Alter signing, he must forward it to die responsible authorities for implementation.
The Exigency Council was established in the Constitutional amendment of 1989 as the body that resolves disputes between Parliament and the Guardian Council (the 12-person body responsible for ensuring that all laws adopted by Parliament are in accordance with Islamic tenets and with the Constitution).
Attendance of Guardian Council members is obligatory when an urgent government or member’s bill is placed on the agenda of Parliament (see Article 97 of the Constitution).
There are five members of the Board of Trustees of the OSF, all from the Executive branch (see Article 8 of the Cabinet Decree on the Code for Execution of the Amended Article 60 of the TFYDP).
The legislative basis of the BMJII is provided in the Monetary and Banking Act, 1972. The Usury-Free Banking Act, 1983, introduced Islamic banking principles.
After 1979, all banks were nationalized under the Banks Nationalization Act. The Law for the Administration of Banks was also adopted in 1979.
There were 10 state-owned banks, with 6 commercial banks (one owned by die SSO) and 4 specialized banks.
Although bank credit is still directed towards specific sectors and enterprises, under the TFYDP, the share of such credit in total bank sector credit is projected to diminish.
Beginning with the 2002/03 budget, subsidized interest rates have, in principle, been reimbursed by the budget, in line with the TFYDP. It is unclear whether this has been done universally. For instance, under Article 173 of the TFYDP, the government is allowed to allocate credit at below market rates to the Ministry of Defense.
Banks reserves absorb about 16 percent of deposits. This is high by international standards. Reserve requirements are differentiated by maturity and type of deposit, making it difficult to discern the extent of the implicit tax on banks.
Also, a new Foreign Investment Law was approved in May 2002.
Major modifications to this Law—including significant reductions in marginal tax rates and a simplification of the tax structure—were made in February 2002.
These were mainly certain property and land taxes that raised little revenue.
Articles 46 and 47 of the TFYDP stipulate that die government should subsidize the price of wheat, rice, vegetable oil, sugar, cheese, medicine, dry milk and agricultural inputs such as fertilizer, pesticides and seeds.
The Treasury maintains separate records of funds transferred for current and development expenditures, facilitating their separate presentation in BMJII reports. Disaggregated expenditure data are available only at the spending agencies, which maintain primary record of expenditure operations—such data are not published.
For example, although the 2002/03 budget shows no BMJII financing of the non-oil deficit, part of the non-oil deficit was financed by a $2.1 billion drawdown of the OSF.
In essence, the TFYDP serves to provide the medium-term budget framework. It is however, not a rolling forward-looking plan, being constrained within a fixed five-year timeframe of 2000-2004.
Following the adoption of the 2001 GFS standards, the term “expenses” is used for cash expenditures.
GFS recommends identifying “net lending for policy purposes” (see Box 4.1 of the 2002 GFS Manual).
The netting of government arrears to the SSO were reflected, however, in the 2002/03 budget.
For the OSF, in 2002/03, the BMJII began keeping records of buybacks and reporting these to the MEAF and the MPO.
In the 2002/03 budget, 516 SUs were specified, a considerable reduction from the 800 or so in prior years.
The SUs typically maintain between 1-10 separate bank accounts, each dedicated to major line items in the budget. For the approximately 800 SUs, an average of 3-4 bank accounts have been estimated.
The monetary data published by the BMJH half-yearly bulletin presents claims on and deposits of the public sector differentiating between “Government,” which is confined to the central government, and “Public Corporations and Agencies” which includes municipalities.
During the year 2000-2001, the AO audited 1,233 SOEs (including subsidiary companies), 498 enterprises controlled by bonyads, 283 enterprises controlled by state-owned banks, and 57 other institutions.
Article 55 of the Constitution.
For instance, for 2002/03, IMF staff estimated that the budgeted non-oil revenue could be overstated by more than 2 percent of GDP.
Sections 1.2 and 1.3 of the IMF Monetary and Financial Transparency Code.