For instance, the littoral states of the Persian Gulf region have applied VAT in a coordinated manner in 2018.
In order to collect taxes efficiently and effectively, countries require proper legislation and structures matching with the functions envisaged in the law (rule of law).
In our country (Iran), the execution of tax system is chiefly summarized in two laws of direct taxes and the VAT as existing laws, and the Iranian National Tax Administration plays the role of the body entitled to collect taxes; while the pattern of optimal governance for the tax-collecting system possesses many other features and essentials.
The taxation authority is merely one of the actors in the implementation of tax-collecting processes; therefore, lack of attention to other actors and handing over all tax-collecting processes to one organization has caused serious troubles, including conflicts of interest, which ultimately led to public dissatisfaction with the body.
Sadly, almost all tax-collecting processes in Iran are carried out by the National Tax Administration, and all structures related to the system are defined under the supervision of the organization.
Iran's National Tax Administration is in charge of all affairs from serious and active presence of the institution in the legislature of tax laws as the main representative of the government in implementing reviews, identification and collection of taxes as well as finally tax-related legal actions. Noticeably, the interest of the tax institution in the mentioned cases causes serious conflict of interest in implementing such various processes.
The tasks of the tax system are not restricted to only tax collection, and one of the main reasons behind policy-making and tax-related legal actions is to collect taxes efficiently and reasonably.
Actually, the most important benefit for the tax system is to attain stable earnings in a fair manner and with the least harm to production capacities, and the main purpose of the tax-related legal actions is to deal with disputes and complaints over the quantity and quality of tax collection by the taxation authority.
But as the main objective of the tax body is to collect taxes, as a result other functions will be overshadowed, wherever there are conflicts of interest, because the tax authority wants to increase its tax revenues; thus, other obligations will not be implemented appropriately.
In view of the fact that the body among governmental pillars has the most interaction with members of society, public dissatisfaction with its performance can cause people's discontent with the administration and the government. Hence, reformation of the governance pattern of the tax system is very decisive both from economic and social viewpoint.
Producers constantly refer to taxation as one of their major challenges. Even though this point of view might be partially because of the unpleasant nature of taxation; however, field studies, including an analysis of taxation history in Iran, as well as the experiences of tax collection in different states, demonstrate that a large part of the remaining dissatisfaction comes from improper strategy of tax system governance.
The governance of Iran's tax system suffers from noteworthy problems. The first serious difficulty detected in Iranian taxation process comes from the conflicts of interest in the responsibilities assigned to the executive entity.
The National Tax Administration, as an executive entity whose key chore is to collect taxes, is also in charge of the functions related to the proceedings, the script of original text of law and its interpretation (via bylaws, instructions and circulars).
Budgetary pressures accompanied by the quantity of bonuses that the tax authority receive based on the volume of tax collections, promote the National Tax Administration to resort to all means at its disposal to increase the amount of tax collections.
The second problem that the governance of Iran's tax system is involved in is the suspension of some of the entity’s functions. The two most important functions that have been ignored in provision of the tax system are appropriate programs for training and ranking. Thus, we must look for a solution that will recover the existing situation continually and resolve the difficulties that have permanently plagued the taxation system time and time again.
If not, only slight amendments to the text of the tax law will not bear fruit. In spite of key changes in tax laws, the output of the system has not altered much over the past 40 years. Even adding new taxes, including VAT, to government incomes has been unsuccessful to make meaningful progress in efficiency of the tax system.