An attempt by Iranian President Mahmoud Ahmadenijad to change the Iranian economy through the implementation of a new sales tax was met with heavy opposition by Iran’s merchant class, the primary bearers of the new tax.
According to the Washington Post, angry shopkeepers refused for the second straight day to open their stores in the central bazaar city of Esfahan. Shopkeepers in other Iranian cities such as Tehran, Mashad and Tabriz also refused to sell goods.
The protests were in response to a tax measure that took effect in the final week of September. The new sales tax dictates that merchants must pay the Iranian government 3 percent of their sales receipts. Some analysts predict that the problem would be transferred to the customer in the form of higher prices, which, as economics dictates, will invariably drive the demand down, and thus, profits down for the merchants.
The sales tax is just one part of a plan by Ahmadenijad to revise Iran’s antiquated tax code and banking systems. The plan also involves ending government subsidies on gasoline, flour, and electricity, all designed to cut government spending and lower inflation, which rose to nearly 30 percent in September of 2008.
The initial revision plan would have only affected gold and jewelry sellers, but the merchant associations of Iran likely feared that it would spread. They held an emergency meeting with representatives of Iran’s tax authority, who agreed to postpone the implementation of the tax for three to six months.
This goes to show that the political power of Iran’s merchant class shouldn’t be ignored. Their simple act of protest by closing shops was enough to reverse the policies of their government. Amidst an ongoing worldwide financial crisis, and the promises of candidates and leaders of implementing financial bailouts and higher taxes, the case of the Iranian merchants shows that the people do have a say over the financial policies of their government. Should vendors in other countries should consider closing down their bazaars too?