IRAN: Gold bazaar on strike as merchants square off with government over tax hike [Updated]
Tehran's main gold bazaar is usually glittering with precious baubles and jewelry fit for royalty, but the last several days have seen it shuttered and empty as the union of goldsmiths and jewelers strikes against a 3% value-added tax.
"We'll stay on strike until the negotiation gets results," Ali Mosavi, a goldsmith in the bazaar, told Babylon & Beyond. "This is the third year we are protesting and so far we have been able to resist [the tax hike]."
The strike appears to be affecting the retail and wholesale gold markets of Tehran's main bazaar as well as the markets of other Iranian cities like Esfahan, Mashhad and Tabriz, but not non-union jewelry stores outside the bazaars.
The government's economic committee issued a statement condemning the strike against the tax, which, it claims, will eliminate illegal transactions and money laundering in the gold market.
"We, the members of the committee, support the law and the stance of tax office and ask the intelligence bodies and judiciary branch to recognize the certain goldsmiths who are impeding the execution of the law and punish them strictly with maximum penalty and review their documents and accounts thoroughly and levy the tax up to the last cent," the statement said.[Updated, Monday, Sept. 27, 7:34 a.m. PDT: Babylon & Beyond has confirmed that the strike has spread to markets in the Karimkhan Zand and Tajrish areas of Tehran. Meanwhile, local press estimates that the value-added tax has raised around $52 million for the government since it was levied.]
Many Iranians view the melodrama as part of the negotiating tactics used by both the Iranian government and the powerful bazaar merchants. Earlier this summer, bazaaris selling everything from garments to shoes to gold used similar tactics against a proposed 70% increase in their income tax. Some complained that the bazaar strikes are about money, not principle, and that wealthy merchants enjoy political protection that teachers and bus drivers do not.
In the end, the government caved, but Iran's economic woes appear far from over. If the government can't raise some cash soon, the political structure could be undermined by popular unrest stemming from high inflation and unemployment, ongoing sanctions from the West and plans to slash the subsidies on which many Iranian depend.
According to local news reports, the goldsmiths and jewelers union has created a task forced charged with negotiating with the government, but many bazaaris appear to be dead-set against any tax hike.
"Today one gold coin was $326," explained one gold merchant. "I buy it for $324 from the bank and with a $2 marginal profit I sell it on the retail market. If the VAT is applied my customer would pay $326 plus $10 as VAT to me and if he needs to cash the coin next week, he has sell it at the same price he has bought it or even for $2 less."
-- Ramin Mostaghim in Tehran and Meris Lutz in Beirut
Photo: The gold bazaar of Tabriz has also reportedly been affected by the strikes over an increase in the value-added tax. Credit: Meisam via Wikimedia Commons