Tehran, Iran – Iranian authorities are rolling out an electronic coupon scheme in recognition of the dire economic conditions under sanctions, but they are also hiking taxes across the board to cover budget deficits.

As the busy shopping and travel season of Nowruz, the Persian New Year, approaches, the government of centrist President Masoud Pezeshkian has revived the coupons scheme for at least a few more months, this time online.

The first use of coupons in Iran dates back to World War II when the country faced dire economic conditions and famine under British and Soviet occupation, which ended in 1946 after five years.

But coupons are mostly remembered for their widespread use in the aftermath of the 1979 revolution. Neighbouring Iraq invaded Iran with support from global and regional powers to counter the new theocratic Iranian establishment, and an eight-year war squeezed the population.

The coupons

Starting this week, low-income and middle-class Iranians are being given up to 5 million rials (just over $5) per person that can be used to buy limited quantities of food like red meat, chicken, eggs, milk, cooking oil, rice and sugar at government prices. About 60 million people are eligible to use the credit.

People can buy only 11 items from a list of select suppliers and shops across the country, and the credit purchases are separate from monthly government cash handouts that currently amount to about $4.85 per person.

The goal is to marginally alleviate short-term pressure on families who have been watching their purchasing power dwindle for years as a result of local mismanagement and all-encompassing Western sanctions.

The government of late President Ebrahim Raisi, which was in office from 2021 to 2024, implemented electronic coupons schemes twice, in 2023 and 2024, for short periods to ease pressure as well.

His immediate predecessor, President Hassan Rouhani, also publicly considered resorting to coupons in the aftermath of the 2018 withdrawal of the United States from Iran’s nuclear deal with world powers and imposed harsh sanctions on the country.

On the other hand, taxing everything

The Pezeshkian administration, which lost two key members to a political dispute with hardliners last week, has been trying to cut costs and increase revenues to grapple with a budget crunch.

The government’s approved budget for the Iranian calendar year 1404, which starts on March 21, shows considerably increased taxes and costs of services – in many cases much higher than Iran’s current 35 percent inflation rate.

Successive Iranian governments have been pushed to find new revenue sources, including through tax increases, to decrease the country’s dependency on oil revenues, which have been hit by the “maximum pressure” tactics by the US.

The Pezeshkian government said this month that it pays for 73 percent of its current expenses, excluding infrastructure expenditures, using tax revenues.

According to a February report by Iran’s Parliament Research Center, total government tax revenues are expected to go up 53 percent in the fiscal year 1404 compared with the previous year, the highest jump in a decade.

The budget foresees a 73 percent surge in total government earnings from corporate income tax compared with the year before and a 68 percent increase in income from personal income taxes.

The research arm of the parliament foresees a 36 percent rise compared with the previous year in wealth and property taxes.

Taxes on imports are to go up 85 percent as well with a significant part of the increase linked with government revenues from imports of new or used foreign vehicles after a years-long ban was lifted in 2022.

During the holy Muslim month of Ramadan, restaurants and hotels need to pay for permits to be able to operate while making sure no one publicly breaks their fast by eating, drinking or smoking, something that is considered a crime under Iran’s Islamic laws.

Taxes are increasing months after Iran raised the age of retirement for men by two years to 62 and increased the years of service required to receive full pensions for men to 35 from 30. That was aimed at reducing alarming pension fund deficits that have threatened financial sustainability and exerted more pressure on the government.

Amid another currency freefall and a lingering energy crisis, the embattled government has also been accused by hardline lawmakers of intentionally devaluing the national currency to make short-term gains.

Making services more expensive

Along with boosted taxes, the 1404 budget makes a long list of government services offered to Iranian and foreign nationals much more costly while ramping up financial penalties for offences.

Fees to issue national IDs and passports are up, and it will be more costly to register vehicles and motorcycles. Several fees linked with universities and technical and vocational exams are expected to rise.

Especially with Nowruz prompting millions of Iranians to travel this month, authorities are expecting much higher revenues from traffic fines because they will be hiked by up to 30 percent until early April.

Many major traffic offences had already seen their penalties tripled about eight months ago with several others, including dangerous or drunk driving, expected to be hiked another 50 percent next year.

Authorities plan on charging Iranians more for trying to leave the country too with departure levies up by about 30 percent. Repeated departures would incur more costs.

The state continues to impose financial penalties on and open criminal cases against people who are deemed to have violated mandatory hijab laws. Vehicles can be fined and impounded for weeks if they are repeatedly reported for hijab offences.

The Iranian government plans to make services offered to millions of migrants and refugees across the country more expensive as well, including costs of issuing or renewing travel and work permits.

Tehran Municipality announced last month that costs of services offered to foreign nationals will be 54 percent higher in the next Iranian year.

These price rises will mostly impact migrants and refugees from neighbouring Afghanistan, whose numbers in Iran swelled in the aftermath of the Taliban takeover of the country after the US withdrew in 2021.

Iranian authorities acknowledge at least six million Afghans live in Iran, a country of about 90 million people, but some estimates are several million higher.