Iranian gold merchants strike to protest tax increase, 2010

The Iranian merchant class makes up an important and influential sector of society. It is also one that has a long history of interacting with the government through the merchant class’s attempts to secure economic justice and fairer taxation policies, as well as challenging the status quo more generally. In 1890, merchants organized bazaar strikes in protest of the tobacco laws implemented by Nasir al-Din Shah, granting foreign companies a monopoly over the tobacco industry in the country. During the 1979 Iranian revolution and the overthrow of the Shah, bazaar merchants were instrumental in organizing strikes and boycotts to express their opposition to the government, and are largely seen as one of the major factors influencing the fall of the Shah’s government. In 2008 and mid 2010, the bazaaris again wielded their power when they held strikes to protest a significant taxation increase imposed by the government on many goods.

In late September through October of 2010, Iranian gold merchants and jewelers dealing in gold carried out a campaign in protest of the Iranian government’s 3% Value Added Tax (VAT) increase. The recent tax levies were mainly due to the country’s depressed economic state, and the government’s attempts to raise more money in light of that. However, many merchants countered this argument by saying that raising taxes on the already-strapped bazaars only exacerbated a tense situation. Government officials and critics of the merchants said that in reality, the VAT only affected gold’s retail price, and thus concerned the consumer more than it did the merchant. These parties claimed that merchants had an unprecedented level of freedom to govern their own accounts, especially the gold merchants and jewelers, and that the major reason behind merchants’ and jewelers’ opposition to the VAT is that VAT checks would have made known the actual size of the merchants’ income, possibly subjecting them to higher income taxation.

Additionally, proponents of the tax said that currently gold merchants don’t have to be concerned with accuracy in keeping track of where they purchase gold, and who they sell it to—the VAT would necessitate better record-keeping and a greater degree of merchant accountability. In a 2004/2005 study, Iran’s gold industry consumption was found to be the sixth largest in the world, after India, the United States, China, Turkey, and Saudi Arabia. Gold is an important and valuable part of Iranian culture, and the country has at least 15,000 gold shops.

The campaign began on September 24, when merchants in Tehran’s central bazaar refused to open their shops. Shortly thereafter, the strike spread to the northwestern city of Tabriz. By October 3, gold merchants in the southern provincial capital of Ahvaz had joined the strike. Initially, Iran’s iron traders joined the strike as well, but they returned to work after about four days of striking. The goals of the gold merchants, as stated by Iran’s Gold and Jewelry Union representatives, was an end to the government’s 3% VAT. The merchants claimed that business was too slow to permit such a tax raise, and that the nature of gold sales—the fact that gold retains its value no matter the form—should exempt it from taxation.

Initially, Iranian officials sent police and security forces to the bazaars in efforts to coerce the merchants into reopening their stores. They arrested two well-known gold merchants, Esagh Shadbash and Mehrdad Fatah, and managed to force several merchants to open their shops. However, the strike continued to grow with merchants and jewelers resisting coercion.

On October 5, when the merchants showed no movement towards opening their stores, government officials called a meeting with union representatives at the Imam Khomeini Mosque in Tehran. The meeting had little success, however. Several merchants reported being pressured into signing a statement renouncing their intent to strike, and threatening the seizure of their shops if they did not obey. The meeting succeeded in getting a few shops to reopen, though the majority of he gold merchants continued with the strike.

Finally, on October 10, with merchants still showing no sign of ending the strike, the government agreed to implement a working committee, with representatives from government and the union, to try to reach a compromise. The deadline for reaching an agreement was set at November 10. With the creation of the committee, the merchants ended their strike on October 10. The government refused to accede to demands that they end the tax entirely, however they made concessions in agreeing to reduce the rate, as well as not overly intruding into merchants’ accounts and record-keeping.