Iran imposes bitumen tax to lift domestic market

The Iranian government has imposed a tax on bitumen exports from the current financial year, starting on 21 March, in an effort to support asphalt consumption within Iran.

It was announced in the annual budget that "in order to supply the required bitumen for domestic consumption by the country, the income from bitumen exports is subject to tax".

This rule was approved and announced in March but executive regulations have not been announced yet.

This new rule will increase costs for bitumen exporters from the current year after bitumen exports were free of tax in the past.

The Iranian government has allocated bitumen supply subsidies in its annual budget for the current financial year. "Oil ministry should allocate 150,000bn Iranian Rials ($3.56mn) for asphalt paving of rural roads and their maintenance activities," according to the budget statement.

The government could be suffering from the shortage of cash flow and there are outstanding payments to bitumen producers, said local market participants.

Bitumen prices have risen by around 250-300pc in the domestic market over the past year due to stronger vacuum bottom prices, which may have bolstered margins for bitumen producers.

"It is not clear how much export tax will be added this time, but bitumen exporters' margins were on average around 3pc in the past years, but the government has received about 25pc tax from domestic sales performance, according to local participants. As a result of this new tax, higher bitumen consumption in the domestic market and a fall in bitumen export volumes are anticipated this year.

Iran produced about 6mn t of bitumen in April 2020-March 2021. Bitumen exports were around 4.5mn-5mn t with domestic consumption of 1mn-1.5mn t during the same period.