Challenges of Cash Subsidies

With the announcement of the removal of gasoline rationing and its supply at a single rate, the prices of several fuel products such as super gasoline, aviation gasoline, diesel, fuel oil, and liquefied gas have increased. In this context, some reports indicate the removal of fuel subsidies for the agricultural sector and the possibility of price increases for certain products in Iran. Shahin Fatemi, an economist and university professor in France, discusses the impact of rising prices of various fuel products in Iran. Shahin Fatemi states: 'This is the result of Ahmadinejad's behavior. When Ahmadinejad started the subsidies, it was very clear that prices would rise in response. The government can either provide subsidies or help keep prices low. Ahmadinejad effectively set a time bomb for the next government. Now that they have been forced to raise energy prices, the result will be that the entire economy of Iran will be affected by this increase. Everything is somewhat dependent on energy prices, from transportation to food. We should expect a wave of price increases at all levels.' When asked about the impact of these price increases on the economy, Fatemi mentions the increase in poverty in Iran. The Islamic government has not defined the poverty line in Iran, but economists estimate it for a family of four at two and a half million tomans. As prices rise, this poverty line will certainly increase. When the government sets the minimum income at 800,000 tomans, and the poverty line is more than three times that, it means that the number of people living below the poverty line will increase daily due to the government's mismanagement. It is said that the government is trying to use the savings from removing subsidies to support low-income families. If such a policy is implemented, Fatemi argues that the government has not been able to establish a proper tax system in Iran over the past thirty-five or thirty-six years to know the income brackets. Currently, subsidies are given to everyone. Those in need do not receive enough, and those who do not need it receive subsidies. The reason is very clear. When the Rouhani government tried not to give subsidies to the four decades of the wealthiest people, they did not know who those four decades were. They have no way to estimate. Therefore, the most fundamental thing they can do is to first have better information about the different income levels in Iran, establish a proper tax system, and the biggest sin of this government is that all the costs of inflation in the country are borne by government employees. Because they know what their income is, and the rest of the people do not pay taxes, the government has no information about their income, and these subsidies and other policies are based on ignorance.