The Effects of Targeted Subsidies on the Exchequer System of Municipalities

An increase in the energy price (due to the targeted subsidies plan) impacts on theexchequer system of the municipalities in terms of the income and the expenses. As faras the income of municipality is concerned, the income from the construction section,as the most important factor in the municipality income, would be reduced. Based onthe calculations, the enforcement of targeted subsidies law would reduce the incomefrom construction section to an amount equal to 5.5 thousand billion Rials (around 550million dollars) provided that no change is made in other factors. Further, in case the useof energy does not have any change (and is the same as the year 1388), the municipalityincome from the VAT Act would have a 1.4-thousand-billion-Rial increase. The resultsof the research indicate that a sharp rise in energy price would cause an 855-, 186-,and 2470-billion Rial increase in personnel expenses, subway plan expenses, andconstruction expenses, respectively. In total, the municipality expenses, for the verythree items, would increase to an amount equal to 3.5 thousand billion Rials (around350 million dollars), 70 percent of which is related to construction expenses. Therefore,the municipality of Tehran, by taking into account just two sources of income andthree expenses items, would face a 7.6 thousand billion Rial budget deficit (around760 million dollars) which comprises 19 percent of the cash budget and 10.1 percentof the total budget of the municipality of Tehran. In case the results are generalizedto all expenses and income items of the municipality of Tehran, the expense effect ofthe targeted subsidies would amount to 23.6 thousand billion Rials (around 2.4 billiondollars) which comprises 32.17 percent of the total budget and 44.3 percent of the cashbudget of the municipality of Tehran.