Long-term transformation of fiscal instruments under sanctions pressure: Iran's experience and its relevance to Russia

Volkov Denis Maksimovich ORCID: 0009-0001-9586-1107 Postgraduate student; Faculty of Taxes, Auditing and Business Analysis; Financial University under the Government of the Russian Federation; Head of the Tax Planning Department; Kupishuz LLC 117041, Russia, Moscow, Admiral Lazarev str., 43, sq. 197 230363@edu.fa.ru

Polezharova Lyudmila Vladimirovna ORCID: 0000-0002-2636-6567 Doctor of Economics Professor; Department of Taxes and Tax Administration; Financial University under the Government of the Russian Federation 15 Verkhnyaya Maslovka str., office 505, Moscow, 127083, Russia lvpolezharova@fa.ru

Introduction

The literature provides a general concept of a sanction as a legal restriction or legal prohibition (law) on certain activities ^{[1, p. 98]}. Sanctions are a phenomenon that is quite common in the history of international economic relations. They are a tool that is often used in geopolitics by individual states or groups of countries in order to influence the decisions of opponents pursuing an independent political course. Recently, the practice of applying sanctions has significantly expanded, which has led to their transformation into a tool for demonstrating "soft power", which allows the initiator countries to achieve their goals without costly reconciliation of the armed forces ^{[2, p. 54]}. As indicated in the report of the Russian International Affairs Committee, sanctions should be understood as an instrument of domination in international relations, which involves the use by the initiator countries of economic pressure measures on the recipient countries in order to achieve a change in their political course ^{[3, p. 46]}.

Sanctions can affect various aspects of the spheres of state activity, including economic, financial, cultural, humanitarian, and political. Speaking about the classification of types and forms of sanctions, researchers most often appeal to the experience of the United States, which is the country that most often uses such an instrument of influence. In particular, the following types of sanctions are distinguished:

- fines against banks. At the same time, financial sector companies are leading in terms of the frequency of being fined in comparison with other industries ^{[4, p. 75]};

- sectoral sanctions, which are restrictions on certain industries of a particular country, for example, in relation to the financial sector, within which restrictions are imposed on financing and other transactions with new debt or new securities;

- blocking sanctions. They are among the most stringent sanctions measures and are introduced by adding a person to the SDN sanctions list, implying a complete ban on access to the US financial system and conducting transactions ^{[5, pp. 43-47]}.

The introduction of large-scale sanctions against Russia in 2022 marked a new era in the evolution of methods of sanctions pressure, the toolkit of restrictions on the country's financial sector has significantly expanded, the following restrictions have been introduced:

- sanctions against the central bank;

- disconnection of national banks from the global financial messaging network (hereinafter referred to as "SWIFT");

- prohibition of most international rating agencies to assign financial and economic ratings to a sub-sanctioned country;

- restricting the country's access to the resources of the IMF and the World Bank;

- limitation of the provision of insurance and reinsurance services for national companies of the "target country" ^{[6, p. 266]}.

All of the above measures of sanctions pressure restrict access to financial resources in the global financial markets, therefore, the effectiveness of Russia's use of domestic financial resources, and, above all, taxes, which are the main source of income for budgets of all levels, is of particular relevance ^{[7, p. 171]}.

Subject and methods of research

The subject of this study is the Iranian tax system and the nature of its changes, which are taking place in the context of "an unprecedented challenge in the form of sanctions from a group of countries led by the United States" ^{[8, p. 32]}.

Despite the development of domestic fiscal measures aimed at stabilizing the economy and public finances during the sanctions period, an analysis of international experience in this regard is useful. The fact is that Russia, although it is the country against which the largest number of sanctions have been imposed (22,230), it is not the only one among the "sub-sanctioned" countries. Thus, as of 09/05/2024, Iran (5,250) ranks second in terms of the number of imposed sanctions, followed by Syria (2,867), North Korea (2,207), Belarus (1,499), Myanmar (1,009), Venezuela (748) ^[9].

It seems that of all the countries mentioned above, Iran is the state whose experience of countering sanctions seems relevant to Russia. Accordingly, the subject of this study is the tax system of Iran in the perspective of several decades. At the same time, the choice of Iran as the country under study is explained by the following reasons:

- the widest range of sanctions was used against Iran, which is comparable to Russia (in terms of the number of sanctions imposed, Iran ranks second after Russia, and until 02/22/2022 it occupied the first place in this indicator);

- sanctions against Iran were imposed for specific political reasons, such as: the nuclear program, human rights violations, politics in the Middle East, the activities of the Islamic Revolutionary Guard Corps (hereinafter – "IRGC");

- Iran has typological similarities with Russia, being a major exporter of oil and gas ^{[10, pp. 406, 410]};

- Iran is the closest to Russia in terms of economic scale. If we estimate the volume of GDP by PPP at current prices according to data for 2022, then Iran, which occupies the 21st place, is the closest of the sub-sanctioned countries to Russia, which occupies the 5th place ^[11];

- Sanctions against Iran have been imposed and in effect for a long period of time (more than 40 years). Thus, an analysis of Iran's experience allows us to see the effect of sanctions on the country's economy and the effectiveness of counteraction measures in the long term.

The research methods used are analysis, synthesis, induction, and classification. The analysis and characterization of the Iranian tax system is carried out through the prism of its adjustment and changes necessary to ensure the budgetary stability of the state under sanctions pressure, based on data published by the World Bank and the Central Bank of Iran, using the following indicators: tax burden, share of tax payments in the total amount of state budget revenues, share of tax payments in the total amount of tax payments. Statistical data are analyzed in dynamics for the period 1972 – 2020. A graphical representation method is used to visualize the results of their analysis.

The purpose of the study is to characterize and identify Iran's positive experience in changing the tax system under sanctions pressure and to develop recommendations for its application in Russia.

Appeal to opponents

The process of imposing sanctions on Iran can be divided into chronological stages. At the same time, the approaches of researchers in this matter vary. Thus, Timofeev I. N., Sokolshchik Y. S. and Morozov V. A. in the article "Sanctions against Iran: lessons for Russia in the new international conditions", several stages of sanctions are distinguished: 1951 - 1954, 1979 - 1987, 1995 - 1997, 2006 - 2008, 2010 - 2015, 2018 G. – present time. These periods are associated with significant historical events: the attempt to nationalize the Anglo-Iranian Oil Company in 1951, the Islamic Revolution of 1979, the beginning of the development of the Iranian nuclear program in the mid-90s, the introduction of international sanctions approved by the UN Security Council in 2006 and 2010, the conclusion of a Joint Comprehensive Plan of Action in 2015., as well as the unilateral withdrawal of the United States from it in 2018 ^{[10, pp. 407 - 409]}.

At the same time, another researcher, Komshukova O. V., in the article "Sanctions against Iran: goals and consequences" considers two main periods of sanctions: the first stage is the period of unilateral sanctions by the United States from 1979 to 2005, the second is the stage of multilateral sanctions, which began in 2006 and lasts to the present ^{[12, c. 24]}.

It seems that the above are subject to rethinking. Thus, the author proposes the following sanctions periods against Iran:

1979 - 1995 (stage I). The United States froze Iranian assets in American banks, imposed a ban on joint ventures for U.S. citizens and organizations, including in the oil and gas sector. In addition, bans on the provision of loans were introduced;

- 1995 - 2005 (stage II). The United States has imposed sanctions on Iran in connection with the development of the Iranian nuclear program. In particular, investments in Iran and the export of certain goods and technologies to the country were banned. It is noteworthy that during this period, the use of secondary sanctions was tested for the first time, but this practice did not become widespread due to the fear of the United States complicating relations with its allies;

- 2005 - 2010 (stage III). Sanctions were imposed by the United Nations, which imposed restrictions on financial transactions in relation to Iran's nuclear missile program, and any financial assistance and subsidies were stopped. The sanctions also extended to Iranian banks and their branches. In 2010, the sanctions became even tougher. In particular, financial transactions were prohibited in relation to banks that were suspected of conducting any operations in relation to Iran's nuclear program, and they were also prohibited from opening branches abroad ^{[10, pp. 407-409]};

- 2010 - 2015 (stage IV). This period is characterized by sanctions from the United Nations, as well as from the EU (2012), which caused particular damage to the Iranian economy ^{[12, p. 26]}. In particular, a ban was imposed on the supply of oil, petroleum products, and natural gas. Other countries besides the EU have also joined this ban;

- 2018 - our time (stage V). Tightening of sanctions by the United States ^{[13, pp. 121, 136]}. In particular, another ban was imposed on Iranian oil and petroleum products, as well as restrictive measures were introduced against other sectors of the Iranian economy. In addition, the country was disconnected from the SWIFT global interbank system again ^{[14, p. 453]}.

Research methodology

Taking into account the above, it is advisable to compare these periods of sanctions pressure with the main characteristics of the Iranian tax system. The analysis of such indicators over time in relation to key events regarding the introduction/lifting of sanctions will allow us to see how the Iranian tax system has transformed over a period of more than 40 years under the conditions of sanctions pressure, as well as to understand the key features of such a transformation.

The difficulty in analyzing data on Iran lies in the limited statistical sources: there is no access to the websites of most official Iranian bodies, and statistics from international organizations regarding the country are quite limited. The most complete statistics on Iran are published by the World Bank (hereinafter – the "WB") and the Central Bank of Iran (hereinafter – the "CBI"). However, even this data has a number of limitations.

Firstly, these sources do not contain data for all periods of the study. Thus, the World Bank publishes the data necessary for this study for the period from 1972 to 2009 (GDP – for the period from 1960 to 2022), and the Central Bank – from 2004 to 2022.

Secondly, the Central Bank publishes data according to the Persian (Iranian) calendar, which does not correspond to the Gregorian calendar used in Russia. Thus, the year according to the Persian calendar begins on Nowruz, which, as a rule, falls on the second half of March (most often on March 19, 20 or 21) ^{[15, p. 3]}. For example, the year 1400 according to the Persian calendar corresponds to the period from 03/21/2021 to 03/20/2022 ^[16]. Given that the statistics of the Central Bank are published monthly on an accrual basis from the beginning of the year of the Persian calendar, in order to convert data to the Gregorian calendar, it is advisable to assume that the year according to the Persian calendar corresponds to the period from April 01 to March 31 of the year according to the Gregorian calendar (taking into account rounding to the end of March). Then, in order to bring the data to the format of the Gregorian calendar, it is necessary to use the formula (1):

Xn = 9mYn-621 + 12mYn-622 – 9mYn-622, (1)

where Xn is the data for the nth year of the Gregorian calendar,

9mYn-621 – data for January-September [n-621] of the year according to the Persian calendar,

12mYn-622 - data for 12 months [n-622] of the year according to the Persian calendar,

9mYn-622 - data for January-September [n-622] of the year according to the Persian calendar.

Thirdly, there is no complete comparability between the WB and CBI data. Thus, the World Bank publishes data on tax payments in an aggregated manner by tax groups (taxes on income, profit and capital gains; insurance premiums; taxes on goods and services; taxes on international trade; other taxes), while the Central Bank publishes detailed data on each tax levied. Accordingly, for the purpose of obtaining comparable indicators during the entire analyzed period (from 1972 to 2020), it is advisable to regroup the CBI data in accordance with the World Bank classification.

Fourth, the World Bank's data on Iran is limited to 2009. Accordingly, in order to extrapolate data up to 2020, it is necessary to calculate tax indicators independently.

Fifth, according to the statistics of the World Bank and the Central Bank, insurance premiums are not included in the amount of tax payments. However, from the point of view of Russian tax legislation, they relate to taxes. In addition, the amounts of insurance premiums as a source of the state budget are significant enough not to be taken into account for the purposes of analysis. In this regard, for information purposes, tax indicators are calculated in two versions: without insurance premiums (for the entire study period) and with insurance premiums (from the beginning of the study period to 2009 inclusive).

Thus, based on the available information, it is possible to calculate and demonstrate the dynamics of the following indicators characterizing the tax system of Iran:

- the tax burden (the ratio of the amount of tax payments to the RUNWAY) ^{[17, p. 5]} for the period 1972 to 2020.;

- the share of tax payments in the total amount of state budget revenues for the period from 1972 to 2020.;

- the structure of the main tax payments in the total amount of tax payments in aggregate for the period from 1972 to 2020.

Analysis

So, the analysis of the indicators of the Iranian tax system should begin with an indicator of the tax burden, which characterizes the level of tax burden of economic entities in the country's economy. The dynamics of this indicator as a percentage is shown in graph 1:

Graph 1 – Dynamics of Iran's tax burden for the period 1972-2020, as a percentage.

Compiled by the author according to ^{[11, 16]}.

As can be seen in the graph below, in general, the level of Iran's tax burden (hereinafter – excluding insurance premiums) tends to decrease (see the trend line). However, fluctuations were observed at different time intervals. Thus, at the beginning of stage I, the tax burden decreased: from 8.9% from the "pre-sanction" 1978 to 5.2% in 1980. Despite a slight increase in 1985, the level of tax burden for the specified sanctions period did not exceed 7.3%. At the same time, in 1993 it significantly decreased to 3.9%. It is worth noting that the beginning of phase II was marked by an increase in the tax burden to the maximum value for the entire period of the study (to more than 10%), but then a decrease followed again. A different dynamic is observed in stages III, IV, V: first, there is a decrease in the tax burden, and then its equalization (similar to stage I). Thus, analyzing the level of Iran's tax burden, it can be concluded that with the beginning of the imposition of sanctions, its level decreases, but then it "evens out" in a few years. This can be explained by the hypothesis that the government, at the beginning of the next wave of economic restrictions, is trying to support entrepreneurs and the population without increasing taxes and, thus, stimulating economic activity. However, taxes are then increased to make up for the losses of the state budget. It is expected that towards the end of stage V, its level will also increase. This hypothesis is confirmed by information about large-scale planned reforms in the field of taxation in Iran, which are designed to increase tax revenues to the budget and involve, among other things, a 50% increase in taxes ^[18].

The analysis of the tax burden indicator, taking into account insurance premiums, reflects the dynamics of the indicator without taking into account insurance premiums. As can be seen in graph 1, both indicators have similar dynamics. Despite the lack of data on insurance premiums for 2010 and beyond, it seems that during this period the indicator will have a dynamics similar to the indicator of the tax burden without taking into account insurance premiums. Thus, the conclusions in this part will be similar. Thus, an intermediate conclusion can be drawn that, regardless of the indicator under study (with or without insurance premiums), the introduction of new sanctions against Iran has an impact on the level of the country's tax burden. In particular, the burden, as a rule, decreases at the initial stage of the imposition of sanctions, and in the process of adapting the economy to sanctions pressure, the level of tax burden increases.

Next, we will analyze the dynamics of the share of tax payments in the total amount of revenues of the state budget of Iran for the period from 1972 to 2020, which is shown in graph 2:

Graph 2 – Dynamics of the share of tax payments in the total amount of revenues of the state budget of Iran for the period from 1972 to 2020, as a percentage

Compiled by the author according to ^{[11, 16]}.

As can be seen in graph 2, before the introduction of large-scale sanctions against Iran, the share of tax payments in the total amount of state budget revenues (excluding insurance premiums) It did not exceed 33.4% (the earliest observational data are presented for 1972), while the absolute minimum also fell on the "pre–sanction" 1974 - 11.9%. The main source of income for the Iranian economy at that time was income from the sale of oil and petroleum products. At the same time, within the framework of the sanctions stages I, II, III, V, the effect of a significant increase in the share of tax payments is observed, respectively, to the following "peak" values: 53.8% (1986), 49.9% (1998), 37.2% (2010), 48.3% (2016), 67.5% (2020 Moreover, the increase in this share occurs with a delayed effect, that is, not in the first year of the introduction of the next sanctions package, but several years later. It is worth noting stage IV separately: the highest value of the share of tax revenues was not achieved during 2010-2015 - it seems that it was shifted in the "inter–fiscal" period 2015-2018 and fell on 2016. All 5 stages of sanctions (stage IV, taking into account the shifted peak value) are characterized by a sharp increase in the share of tax revenues in the total amount of state budget revenues, which at the same time means a decrease in the share of other revenues, in particular, income from the sale of oil and petroleum products - another significant source of income for Iran. Thus, under the conditions of sanctions, the possibilities of replenishing the state budget with other, non-tax revenues are decreasing, and tax revenues are becoming increasingly important in terms of ensuring financing of state activities.

Similarly to the indicator of the tax burden, the share of tax payments in the total amount of state budget revenues, including and excluding insurance premiums, have similar dynamics, therefore, the indicator, taking into account insurance premiums, is not analyzed separately.

Thus, Iran's experience clearly demonstrates that tax payments become the main source of replenishment of the state budget, which eventually displace other non-tax revenues.

Next, it is necessary to investigate the structure of the main tax payments in the total amount of tax payments in an aggregated manner for the period from 1972 to 2020. The grouping of taxes is based on the classification of the World Bank. In particular, four tax groups are used for the purposes of the analysis:

- taxes on income, profit and capital gains, which include income taxes of individuals and legal entities, corporate income taxes, taxes on income from the use of capital, land, securities and other assets. In fact, they correspond to direct taxes;

- taxes on goods and services, which include taxes on turnover or sales, VAT, excise taxes, certain taxes on the sale of services, taxes on mining, property taxes, taxes on profits of state monopolies. Despite the presence of different groups of taxes in this category, given that the most significant share falls on indirect taxes (turnover or sales taxes, VAT and excise taxes), for the purposes of further analysis, it can be assumed that this group of taxes corresponds to indirect taxes;

- taxes on international trade, which include import and export duties, taxes on profits of import and export monopolies, taxes on income in the form of exchange differences, taxes on foreign exchange transactions. Taking into account that the most significant share in the total amount of taxes on international trade falls on import and export duties, for the purposes of further analysis, it can be assumed that this group of taxes corresponds to customs duties ^[11];

- other taxes, which include all taxes that do not belong to groups 1-3.

Since the World Bank publishes statistics on the share of tax payments in the context of groups 1-4 to the total amount of state budget revenues, and not to the total amount of tax payments, in order to find out the share of each type of tax payments to the total amount of tax payments, it is necessary to make additional calculations using statistical indicators such as the share of income the state budget in the RUNWAY and the share of tax revenues in GDP. Thus, the share of tax payments in the total amount of tax payments is calculated using the formula (2):

X = Ah * B/C, (2)

where X is the share of the tax group in the total amount of tax payments,

Ah – the share of the corresponding group of taxes in the total amount of state budget revenues,

C – the share of state budget revenues in the RUNWAY,

C is the share of tax revenues in GDP.

According to formula (2), statistical indicators are calculated for the period from 1972 to 2009 inclusive. As for the data for 2010-2022, data from the Central Bank are used to calculate them. Since the CBI does not use the grouping proposed by the World Bank, but provides more detailed statistics for each tax, to ensure comparability of data, tax indicators according to the CBI are distributed into one of the four above-mentioned groups. In particular,

- the group "taxes on income, profit and capital gains" includes corporate taxes (corporatetax), taxes on individuals (incometax) and some taxes from the composition of taxes on assets (wealthtax): taxes on goodwill (transferofgoodwill), taxes on the purchase and sale of securities (sharestransfer) and taxes in relation to the purchase and sale of property (propertytransactions);

- the group "taxes on goods and services" includes the corresponding taxes on goods and services (taxongoodsandservices);

- the group "taxes on international trade" includes customs duties (customsduty);

- the "other taxes" group includes the remaining taxes from the composition of taxes on assets (wealthtax): inheritance tax (inheritancetax), stamp duty (stampduty) and other taxes (other).

An analysis of the dynamics of the share of tax payments in the context of groups 1-4 to the total amount of tax payments, taking into account the above adjustments, is presented in graph 3:

Graph 3 – Dynamics of the share of tax payments in the total amount of Iran's tax payments for the period from 1972 to 2020, as a percentage

Compiled by the author according to ^{[11, 16]}.

Graph 3 provides a reference analysis of the dynamics of insurance premiums, which, as mentioned above, do not relate to taxes according to the classification of the World Bank and the Central Bank. Insurance premiums are presented as a share of insurance premiums from the total amount of tax payments.

As can be seen from the graph above, during the "pre-sanctions" period, the largest share of Iran's tax revenues came from direct taxes and customs duties. At the same time, the share of insurance premiums was minimal. During phase I, there are significant fluctuations between direct taxes and customs duties, but they remain the most significant taxes from the point of view of the state budget until the end of phase I, that is, until 1995. However, during phase I, the share of insurance premiums increases significantly, reaching a peak of 35.3% in 1993. At the same time, the share of other taxes decreased from 19.1% in 1979 to 2.0% in 1995 and remained at approximately the same level until the end of the analyzed period.

Stage II is characterized by a change in the structure of tax payments. Against the background of a further increase in the share of direct taxes, the share of insurance premiums increased significantly, in some years exceeding even direct taxes in amount (2001 - 2004). Namely, starting from stage II, there was a trend towards a decrease in the share of customs duties: at the end of this period, they accounted for 26.6% of all tax payments, while As before, in some years they accounted for more than 40% of all tax payments. The dynamics of the indirect taxes indicator during phase II is not stable: despite a significant "surge" in 1999 (up to 45.5%), there is no pronounced trend in the dynamics of this indicator during the entire stage.

As for phase III, during this period there has been a further decrease in the share of customs duties, as well as indirect taxes in the structure of tax payments, while the amount of insurance premiums and direct taxes continues to increase. In particular, the share of customs duties tends to 20%, and the share of direct taxes reached the maximum value for the entire observation period: 66.7% in 2009.

Stage IV is characterized, on the one hand, by a decrease in the share of direct taxes, and, on the other hand, by a significant increase in indirect taxes from 11.5% in 2010 to 31.4% in 2015. It seems that this effect is caused by the introduction of VAT in Iran since 2008 and a consistent increase in the rate of this tax from 3% in 2008 to 8% in 2015 (the standard rate of 9% has been in effect since 2016) ^{[19, p. 5, 7.]}. At the same time, the share of direct taxes decreased from 62.3% in 2010 to 49.2% in 2015.

As for stage V, during this period indirect taxes finally occupy the second place among all taxes in terms of replenishment of the state budget (excluding insurance premiums, for which data are not available), while direct taxes occupy the first place: according to data for 2020, they accounted for more than half of all tax payments (54.9%). It is noteworthy that the share of customs duties decreased to 10.2% - the lowest figure for the entire observation period.

Thus, it can be concluded that during the period from 1972 to 2020, the structure of Iran's tax payments has undergone significant changes. The key ones are a gradual reduction in the share of customs duties and an increase in the share of direct and indirect taxes. In addition, it can also be noted a significant increase in the amount of insurance premiums charged according to the data available up to and including 2009. Thus, as of 2020, direct and indirect taxes provide almost 90% of all tax revenues of the Iranian state budget.

Conclusions

Having analyzed the stages of transformation of fiscal instruments in the context of sanctions pressure on the Iranian economy for the period from 1979 to 2020, using the example of certain indicators, the following conclusions can be drawn.

Firstly, the tax burden in Iran has been gradually decreasing for more than forty years. At the same time, there are certain fluctuations in the tax burden depending on the sanctions stage. Thus, when sanctions are imposed at first, the level of the tax burden decreases, which seems to be caused by the need to introduce counter-sanctions measures aimed at supporting the economy under restrictions. Obviously, tax increases at this time can be disastrous for organizations and the public. However, after some time, the level of the tax burden gradually begins to grow – this is due to the need to ensure state budget revenues and "compensate" for the lost revenues due to the introduction of incentive measures.

Secondly, tax payments become the main source of income for the state budget, which have no alternative character. This is due to the peculiarities of the sanctions policy, which is aimed primarily at restricting the country's international trade (in this case, Iran). As a rule, the industries that are the most developed and which bring the largest revenues to the state budget fall under sanctions. In the case of Iran, this is primarily oil production and the production of petroleum products. Due to the oil embargo imposed by other countries, Iran's ability to replenish the state budget through oil sales has significantly decreased. Taking into account the fact that taxes are least subject to international sanctions, they have become a key source of government revenue.

Thirdly, the structure of tax payments has changed significantly over the years of sanctions pressure on Iran. If at the beginning of the analyzed period the largest share was accounted for by direct taxes and customs duties, then against the background of restrictions on international trade, the role of customs duties in replenishing the state budget has significantly decreased. At the same time, there is a clearly noticeable trend towards an increase in the tax burden on the Iranian population and organizations, which is characterized, first of all, by a multiple increase in the amounts of insurance premiums collected, an increase in indirect taxes (primarily due to the introduction of VAT), as well as the preservation of a high proportion of direct taxes in the structure of tax payments. In fact, the population and organizations operating in the country are becoming the main source of replenishment of the Iranian state budget against the background of a reduction in international trade and the imposition of large-scale sanctions.

At the moment, there are no grounds for lifting or at least easing international sanctions against Iran. In this regard, it seems that the trends observed in relation to the transformation of the country's tax system will continue in the future. However, with a change in the approach of the international community towards Iran, the tax system, being part of the economic system, will also change and adapt to new economic realities.

Scientific novelty

As mentioned above, Russia is currently experiencing enormous sanctions pressure. Given that this situation is expected to persist in the near future, Iran's experience is extremely relevant for the Russian economy.

One of the circumstances that researchers need to further assess is a significant reduction in the share of non-tax budget revenues, which is clearly observed in the example of Iran. This means that the search for sources of financing public finances for a country that is subject to sanctions pressure is becoming dramatically more complicated. Instead of external sources (in particular, export revenue), the country needs to refocus on internal sources of government revenue, one of which is taxes. Undoubtedly, Russia's export potential is significantly higher than Iran's capabilities, but despite this, it must be borne in mind that the imposition of sanctions in every possible way hinders foreign trade and at the same time strengthens the role of taxation as one of the most important, if not the only, factors in the growth of government revenues.

This leads to another conclusion, which is that as the sanctions pressure increases, the role of the fiscal function of taxes increases significantly, which is to provide state revenues to finance various types of government spending, such as education, health, security and other social programs ^{[20, p. 841]}. The main task of the state is the most effective search and withdrawal of tax reserves, which, on the one hand, involves imposing a greater tax burden on tax subjects, and, on the other hand, maintaining a balance of public and private interests. Consequently, under the conditions of sanctions pressure, the state has no other choice but to collect the maximum possible amount of taxes from those entities who can pay it, while not increasing the tax burden of those who cannot pay. One of the obvious tools that is designed to implement this approach is a progressive scale of taxation. If we abstract from possible discussions regarding the conceptual economic fairness of such a taxation procedure, then we can say with confidence that progressive taxation contributes to replenishing the state budget without repeatedly increasing the tax burden for the vast majority of subjects (the rich, whose percentage share is usually less than the share of the "middle class" and the poor, they pay more). Accordingly, if the state sets as its main task the most effective replenishment of the state budget against the background of limited other sources of income, which becomes extremely relevant in the context of sanctions, then it seems that progressive taxation is designed to solve this problem quite successfully.

For a long time there has been a public discussion in Russia regarding the introduction of a progressive scale of taxation in respect of personal income, which was eventually introduced starting from 01.01.2025 (Federal Law No. 176-FZ of 07/12/2024). At the same time, such an innovation was, in many ways, the result of sanctions: non-tax sources of state budget revenues have significantly decreased, which correlates with the dynamics of Iran's public finances, and expenditures have increased. In the current conditions, when the Russian economy is feeling enormous sanctions pressure, the introduction of a progressive scale of taxation, as well as an increase in the general corporate income tax rate to 25 percent (by 5 percentage points) while maintaining existing preferential mechanisms, becomes an alternative way to replenish government revenues with minimal possible consequences for the economy and the population.