|Iran Country fact sheet||Previous Updates|
Background: Iran became an Islamic Republic after a popular uprising overthrew the regime of the pro-Western shah in 1979. As vali-e-faqih (the supreme Islamic jurisprudent), Ayatollah Ruhollah Khomeini became the supreme religious and political leader. From 1980 to 1988 Iran was at war with Iraq. Akbar Hashemi Rafsanjani was president for two terms from 1989 to 1997, during which time attempts to introduce economic reforms were frustrated by internal opposition. Mohammed Khatami, first elected president in 1997, tried to introduce social and political reforms, backed by a reformist Majlis (parliament). However, the conservative establishment blocked these efforts and in 2004 hardline conservatives won control of parliament. In 2005 and again in 2009 Mahmoud Ahmadinejad, a populist conservative, was elected to the presidency. Disputes over the fairness of his re-election in 2009 led to some of the most intense street protests since 1979.
Political structure: Iran is defined as an Islamic Republic in its constitution. The president is elected every four years by popular vote, although all candidates must be vetted by the Guardian Council. Superimposed on this republican constitutional structure are several unique Islamic features: the vali-e-faqih exercises considerable power over the government, and the conservative Guardian Council approves all legislation to ensure that it complies with Islamic law.
Policy issues: Iran’s five-year economic plans have emphasised a gradual move towards a market-oriented economy, but political and social concerns, and external debt problems, have hampered progress. Faster movement, however, occurred under the third five-year plan (2000-04), which advocated a more ambitious programme of liberalisation, diversification and privatisation. The resolution of Iran’s external debt problems eased the policymaking environment and facilitated the unification of the exchange rate in 2002. However, the government of Mr Ahmadinejad remains unsympathetic to reform.
Taxation: Iranian tax laws are complex and have been applied inconsistently. The government has lowered unified corporation tax rates and aims to simplify tax administration, but progress will continue to be slow, and foreign firms are likely to continue to face some uncertainty when assessing their tax liabilities.
Foreign trade: Oil earnings comprise over 80% of export revenue. High oil prices since 2000 have resulted in large trade surpluses, despite a marked rise in import spending, as strong foreign-exchange earnings and the easing of the debt-repayment schedule have allowed Bank Markazi (the central bank) to relax its import-compression programme. However, the trade surplus narrowed sharply in 2009, on the back of lower average oil prices.
SOURCE: Country Forecast