Document Type : ORIGINAL ARTICLE

Authors

• Amin ShahbabayeAshtiani ¹
• MohammadJavad Sharifzadeh ²

¹ PhD student at Imam Sadiq University

² Associate Professor, Department of Political Economy, Faculty of Islamic Studies and Economics, Imam Sadiq University, Tehran, Iran

Abstract

This study applies a static, non-behavioral microsimulation model using Iran’s Household Income and Expenditure Survey (HIES) 1402 (2023/24) to evaluate the redistributive implications of moving from schedular (source-based) income taxation to a comprehensive personal income tax (PIT) under three scenarios. Scenario 1 represents separate taxation of distinct income sources, mirroring the fragmented regime. Scenario 2 aggregates taxable income sources under the PIT framework proposed in the Direct Taxes Law Reform Bill. Scenario 3 combines the PIT with a redistributive policy that allocates the incremental revenue from integration to targeted cash transfers for households below the relative poverty line. Relative to the pre-tax baseline (Gini = 0.3677), Scenario 1 reduces inequality by 2.7 percent, lowering the Gini to 0.3576. Scenario 2 delivers a larger but still modest effect, reducing the Gini by 4.9 percent to 0.3490. In contrast, Scenario 3 yields a sizeable redistributive impact: the Gini declines by 15.9 percent to 0.3090. The results indicate that the fragmented system exhibits limited progressivity—particularly at the top of the distribution—and that tax-base integration alone is unlikely to generate substantial redistribution. Meaningful inequality reduction requires complementary reforms, including a more progressive design of deductions and exemptions within the PIT, targeted allocation of incremental revenues to anti-poverty transfers, and strengthened data transparency and enforcement to expand coverage of informal and underreported incomes.

Keywords

• Global Taxation
• Income Redistribution
• Schedular Taxation
• Comprehensive Personal Income Tax

Main Subjects

• Income inequality