Nowadays, tariffs have become a challenging issue that has been discussed by analysts and experts, an important issue for trade plan and importing control in every country. Moreover, it helps protecting domestic industries in each country. The government of Iran wanted to reduce the levels of tariffs from 8 to 6 and that is mostly because of decrease in average tariffs’ coefficient according to legislation in 2014. This legislation was established mostly in order to promote the level of social welfare, more transparency in the market and facilitate joining WTO. This year, the government suspended this legislation because of some problems such as current recession in Iran. Tariffs plays an important role in pricing mechanism to provide price advantages not only for domestic companies but also it bans importing of foreign goods that are already being produced domestically.
There were 120 different levels of tariffs in Iran in 1998 and it has been reduced to 15 in 2013 and then it decreased to 8 in 2016 according to government legislation in 2013.
Goods included in tariffs classification are as following:
Alive animal and animal products, vegetable products, vegetable and animal oil, food industry products, mineral products, chemical industry products, plastic material and its products, leather and rawhide, woody products, wood pulp and its cellulose products, loom products, natural or artificial pearl and precious stones, stone, cement, gypsum and glass artifacts, basic metals and its products, machinery and mechanical products, vehicles, optic devices, guns and ammunition, art and antique objects and various products.
The significant reason that the government prefer to decrease tariffs’ levels in recent years was to facilitate the process of joining WTO.
Tariffs in Iran are too much comparing to WTO’s tariffs binding, neighbor countries and developed countries consequently government of Iran plans to reduce them. Trade weighted average in some countries in 2014 is shown in the table below (in percent):
*Its source except Iran is http://stat.wto.org/
Now, the method is used in calculating of tariffs’ levels are based on trial and error and survey from financial experts and it would be better that the government calculate it according to Iran’s development plan and to make its coefficient constant in future, it will increase the confidence of foreign investors.
In order to join WTO, it would be necessary to decrease tariffs, and by this way, government has to reduce tariffs in future, but this decision may postpone to two years later. This decrement would be a good opportunity for some companies in specific situation. For example, if the tariffs on auto parts reduces, the cost of goods sold will be decreased in car companies and by this way, car companies’ gross profit margin will be increased. But, if tariffs on cars decrease, domestic producers should compete against foreign competitors to achieve a share in the market. In fact, sometimes tariffs do serve as a double-edged sword.
All in all, with all this taken into account, the government has to decrease tariffs in Iran step by step although some of companies might face some problems by this legislation. Lack of transparency in Iran’s market and ambiguous perspective of joining WTO were major restrictions for foreign investors that government try to resolve them by reducing tariffs. Government can’t turn the blind eye to the opportunities will be gained by joining WTO and one of the major barriers to do this is to decrease tariffs.