TEHRAN // Merchants of the city's historic Grand Bazaar decided to open their kiosks and shops yesterday afternoon after verbal promises from guild leaders that the imposition of a dreaded value-added tax had been put off for the time being. Flyers from the country's tax department were also posted on the walls in the bazaar announcing that the president had ordered the implementation of the law to be postponed until further notice. The merchants, known as bazaaris, began their strike last week against a three per cent VAT. "The strike couldn't go on forever because it would hurt many businesses badly. The bazaaris sent a message to the government by going on strike and we hope that the government has understood our message," said a home appliances wholesaler who declined to be named. Yesterday, analysts of the situation said the strike - which lasted a week even though Mahmoud Ahmadinejad, the president, had personally ordered a two-month freeze of its implementation the night before the strike was called in the Grand Bazaar of Tehran - was a politically motivated move. Mohammad Reza Taraghi, a spokesman for the conservative Motalefeh Party, whose history is tied to the bazaar, blamed the strike on propaganda of the political opposition who, he said, "magnify and exaggerate the problem". "The closure of the bazaar businesses in protest to VAT is encouraged by the opponents of the government who are taking advantage of the situation to develop the misunderstanding between the government and the bazaaris into a social movement," Mr Taraghi said before the strike was called off. "Our party believes bazaaris are not going to benefit from methods like closing down the bazaar as this would only lead to jeopardising the system and the country's national security. We advise the bazaaris to talk to the government through their guild unions to resolve the issue," he said. The Motalefeh Party has deep roots in the bazaar establishment. It emerged from the unification of seven bazaari religious groups in the 1960s. Bazaaris played a crucial role in the Islamic Revolution of 1979 and since had lent their support to conservatives. The party supported Mr Ahmadinejad in the presidential elections of 2005 but has recently come to question some of the economic policies of his government that have led to high inflation. This was the first time since the revolution that the bazaaris had gone on strike in protest against government policies. Others see the protests as a sign of the new generation of bazaaris' demand for more economic and political power. Saeed Laylaz, an economic and political analyst and editor of Sarmayeh, a daily economic newspaper, said the bazaaris' protest against the VAT even after the law's temporary freeze was related to the now middle class bazaaris' wish to regain the power and influence they had lost during the economic modernisation that followed the Islamic Revolution. "The bazaaris' protest can be seen as a sign of the revival of the civil society," Mr Laylaz said. The bazaaris themselves are well aware of their declined status. "The bazaars were once the heart of the Iranian economy and politics. But political influence comes with money and most of the money has moved out of the bazaar to more benefit-making venues such as the real estate market and import companies outside the bazaar," said a merchant in Tehran's Grand Bazaar who declined to be named. Most of the bazaar merchants now own businesses with much smaller turnover than they would have had a few decades ago and are therefore much more vulnerable to the mounting economic pressure, he said. Annual inflation is 23.3 per cent. Goldsmiths in the bazaar of Isfahan began the protest against the VAT last week. It then spread to the bazaars of other big Iranian cities, including Tabriz and Mashhad, and by Wednesday had spread to the capital, Tehran, where gold and home appliance merchants - likely to be worst affected by a VAT - closed their shops. Mr Ahmadinejad had defended the implementation of the law in an interview broadcast on state television on Tuesday, the night before the beginning of the Tehran bazaar merchants' protest. The law actually came into force on Sept 22. But the protests forced Mr Ahmadinejad on Thursday to push implementation of the law off by two months and yesterday to put it off indefinitely. According to the law most food items, such as sugar, wheat and cooking oil, as well as agricultural products and medicine are exempt from VAT. The important carpet industry was exempted as well. The tax is three per cent, but bazaaris and others against the VAT, say its effective rate would be much higher because it is imposed at every level from producer to consumer. One shopkeeper estimated the tax would mean a price hike to consumers of between 10 per cent and 15 per cent. On Sunday all shopkeepers of the Grand Bazaar of Tehran pulled down shutters of their shops. Even businesses exempted from VAT such as the carpet-selling businesses joined in the general strike. "Our businesses have been greatly affected by the high inflation. The introduction of a three per cent VAT will only worsen our situation by decreasing consumer demand for goods," said a shopkeeper in the Grand Bazaar of Tehran. Outside the Grand Bazaar, the main arcade in a huge network of interconnected souqs and side alleys covering 110 hectares, businesses were not closed. msinaiee@thenational.ae
