Strike in Iran Bazaar enters its second week-report

Tue Jul 13, 2010 6:25pm GMT

TEHRAN, July 13 (Reuters) - A strike in Tehran's main bazaar in protest against higher taxes has entered its second week even though the government has backed down in the standoff, moderate website Parlemannews reported on Tuesday.

The strike by the influential Grand Bazaar poses political and economic challenges to President Mahmoud Ahmadinejad, who was re-elected last year in a disputed vote. Authorities deny the opposition's claim that the vote was rigged.

Merchants in the bazaar went on strike last Tuesday, forcing the government to announce on Monday it would suspend its plan to raise the rate of Value Added Tax (VAT) by as much as 70 percent on certain goods.

"Shops in Tehran's Bazaar are still closed. It is not clear when merchants will end the strike," the website said, quoting an unnamed merchant.

A merchant told Reuters on Monday the strike would continue until the tax plan was dropped altogether.

In 2008, Ahmadinejad was forced to suspend implementing the plan to introduce 3 percent VAT for two months after merchants in Tehran and other cities went on strike for a week.

Since its implementation, the VAT rate has been raised annually by between six and 15 percent, depending on the goods.

The government has been trying to fill the shortfall of oil income by increasing tax. Iran's economy is more than 60 percent dependent on oil income and the sharp fall in oil prices threatens the economy.

The tax forms part of wider economic reforms planned by Ahmadinejad's government, including a bill that will end subsidies on energy and food. Critics say carrying out the subsidy bill will increase the cost of living in Iran.   Continued...

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