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Monday, October 13, 2008

Oil price plunge hurting mullahs: Ahmadinejad suspends tax hike after merchant revolt

NICOSIA — Iran, in a rare concession, has suspended a sales tax in wake of a strike by merchants.

Iranian President Mahmoud Ahmadinejad ordered the government to suspend a new tax that sparked unrest in the nation's business community, Middle East Newsline reported. The three-percent sales tax had been imposed in September 2008 amid the drop in the price of crude oil.

Officials said the Iranian government depends on crude oil exports for 80 percent of the state budget. Taxes comprise the remaining portion of the budget.

Crude oil prices have fallen by nearly 50 percent since July 2008. The drop in prices was said to have fueled a recession in Iran.

"The tax will be suspended for up to three months," an Iranian source said.

Ahmadinejad intervened in the crisis after scores of merchants, led by goldsmiths, shut their businesses in protest of the tax on Oct. 8. The Iranian president has blocked other unpopular economic measures, including gasoline rationing.

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"We've had no agreements, but all our efforts are aimed at convincing the merchants to open their shops," Iranian Guilds Association director Mohammed Azad said.

"This has pushed the government to announce that it will review the new VAT [value added tax] mechanism," Iran's Press TV said.

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