Economic ID Code, Cashflow & Commodity Flow System, and Its Role in Tax Collection a case study of the Islamic republic of iran


Growth of tax revenues .plays a major role in a country's financial
policies. Improvement of tax revenues, and increase of tax ( T ) to gross
domestic product (GDP) r atio, provides grounds for replacing oil
revenues in the government budget with a more robust budgetary
incomes. This would result in a move towards a less reliance of the
budget on oil revenues.
While examining the tax laws & regulations,we come across two basic
shortcomings which need to be rectified:
First, procedures for tax assessment & claim from the tax access. The
present regulations pave the way for tax evasion. This happens because.
the penalties levied and the detection, presuming examption, compared
with the actual payments due, are almost incentives for tax evasion.
Second, The present system has no facilities to provide information
on tax payers' income and financial activities. Consequently, only
random, and sometimes non-relevant information is produced, This 'is a
hindrance to assess properly the . taxable income of the subject being
The present paper is a .theoretical survey which shows that, in order
to maximize government tax income, it is necessary to draw up tax
regulations in a manner that penalties arising from tax evasion would
always amount to a higher figure than the due tax paid on .time..The first
defect is thus eliminated.
Another requirement to increase tax incomes . to equally
improve the detection procedures ,on the probability of tax payers'
evasion and fraud. Information system on tax payers' activities should
enable the government, immediately to detect and" follow-up . any
instance of false information on incomes.
In order to design such a system :of information-on tax payers'
financial activities, it is being suggested .in this paper that an economic
IDcode, and an account based on that ,cod.e, should be assigned to each
tax payer.
Economic activities are generally divided.into two sectors: monetary
and commodity. In the monetary sector, money and credit supply comes
from two main sources, i.e. the government and the .banks. In this
system any kind of payment from the budget is carried out through the
budgetary accountant. He is responsible to register economic ID code of
receivers of government credits, resulting from sale of their goods and
services, and forward the same to the Economic Data Center.
When granting credits, the banks are also required to report to this
center the economic ID code and the amount of bank credit received by
the applicant.
In commodity sector, the origin of the supply of goods is either
domestic productions or import. Again, each manufacturing company
must report the amount of the commodity sold to each individual,
together with his economic ID code. In the imports sector, the customs
office is responsible to check all importers and their economic ID codes,
together with the amount of imports, and to report this information to
the Economic Data Center.
In this manner, in the computerized data center situated at the
ministry of Economic Affairs and Finance, all the data of the economic .
activities, in each of the following fields for each individual with an
economic ID code, are recorded :
- Income received from the government through the sale of goods
and services
- Credits obtained from banks
- Goods purchased from manufacturing firms
- Imports through the country's ,customs .
The above data is processed',by proper softwares,enabling the
assessors to have access to more ' reliable and up-to-date information
about the tax payers' activities. This minimizes the probability of tax
evasion by the tax payers due to clack of information.. Based on a
theoretical analysis, given in section two of the paper.rthe probability
can further be minimized by levying proper penalties for those who
resort to tax evasion.
The above model has been tried on by manufac