Tax evasion and the use of shell companies for illicit financial operations—such as money laundering and sanction circumvention—have become entrenched problems within the structure of Iran regime’s economy.
These practices, which rely heavily on the use of fake companies and rented identities, inflict extensive damage on the country’s financial system each year, undermining both transparency and public trust.
The Hidden Network of Shell Companies
Within Iran regime’s opaque and inefficient economic system, a dense and often invisible network of companies has emerged. These businesses are frequently registered in the names of individuals who are unaware of the full implications of their involvement. Often, low-income citizens or vulnerable individuals are paid modest sums in exchange for handing over their identification documents to groups that go on to commit financial crimes in their names.
The damage is multifaceted: the tax system becomes increasingly unjust, genuine economic competition is eroded, and identity renters—who are often unaware participants—are scapegoated and prosecuted while the masterminds behind these operations remain untouched.
Shocking Statistics: The Scale of the Problem
A revealing report published by the state-run Farhikhtegan newspaper in January 2023 shed light on the scope of the issue. Drawing on official data, the report found that more than 2 million companies are registered in Iran. Of these, 650,000 are inactive, and 1.4 million are listed as active. However, around 1.1 million of these “active” companies—nearly 80 percent—have no tax records whatsoever, raising serious questions about their legitimacy.
Historical trends, particularly during the post-1979 period and the intensification of international sanctions between 2006 and 2011, suggest that many of these companies were never intended to engage in genuine economic activity. Instead, they were created for rent-seeking, money laundering, and bypassing sanctions.
Structural Incentives for Corruption
Regime experts point to a broken regulatory environment that allows anyone to register a company with minimal verification. In this context, corruption rings exploit vulnerable individuals—often low-level employees or their relatives—to establish bogus companies. These entities issue fictitious invoices, inflate turnovers, and evade taxes.
Official estimates indicate that over 20 percent of tax returns in Iran involve the use of fake invoices. These invoices are typically issued by companies with no real business activity or even a physical address.
The same pattern is evident in several high-profile corruption cases. The use of fictitious invoices and shell companies to manipulate prices and launder money has become a standard method in fraud involving government currency allocations.
Single-Use Business Cards and “Coarse-Grained” Groups
One striking example of systemic abuse is the issuance of so-called “single-use business cards.” These are often registered in the names of unaware or impoverished individuals whose identities are leased to organized criminal networks. Reports suggest that over 28 trillion tomans in tax evasion has been facilitated through such cards alone.
Hadi Khani, Deputy Minister of Economy and head of the Financial Intelligence Center, has warned that selling or renting identities can lead individuals into serious criminal activity, including money laundering and tax evasion. He likened shell companies to a “chronic disease” that has infected the Iranian economy.
The Upper Echelons of Evasion
According to the Iranian regime Parliament’s Research Center, over 50 percent of the country’s 200 most profitable companies pay less than 10 percent of the legal tax rate—despite a statutory profit tax rate of 25 percent. In the year 1400 (2021–2022), these companies are estimated to have evaded taxes totaling 853 trillion tomans.
Regime-aligned economic experts, including Mohammad Sadeghi, have repeatedly emphasized that small businesses are not the root of the problem. Instead, they point to corruption within government institutions, quasi-state entities, and powerful economic foundations. These groups operate vast networks of shell companies and use leased bank accounts to obscure the true sources of their income and minimize taxable profits.
Case Studies in Corruption
During the implementation of the preferential exchange rate policy in 2018, the Secretary-General of the Society of Certified Public Accountants disclosed that audit information was missing for around 600 companies that had received subsidized foreign currency. Investigations revealed that many of these companies existed only on paper and were part of larger shell company networks.
In the case of the Debsh Tea Company, one of the charges involved the systematic use of fake documents and front companies. Similarly, in the case of Mohammad Emami—linked to the Farhangian Reserve Fund and Sarmayeh Bank—identities of homeless or impoverished individuals were used to register companies and open accounts.
The Failure of Oversight and Reform
Although various Iranian administrations have promoted e-government solutions to curb such practices, these measures have fallen short. The renting of identities for vehicle registration, loan applications, and currency allocation continues to rise.
Many economists argue that passing and implementing the Financial Action Task Force (FATF) bills would help dismantle financial corruption networks and identify shell companies. However, the lack of political will and the financial interests of powerful factions have prevented meaningful reform.
The Need for Structural Transparency
The creation and operation of these shell company networks require not only capital but access to Iran regime’s administrative infrastructure—something far beyond the reach of ordinary citizens or small businesses. Addressing the issue requires transparency in government-affiliated institutions, banks, and economic organizations.
Despite the gravity of the problem, no public report has disclosed the full extent of the profits gained from these violations or the identities of the individuals and entities that benefitted from state-disbursed currency. This silence reflects the depth of corruption embedded in the formal structure of the Iranian economy.
Conclusion: A System in Decay
The unchecked spread of shell companies and financial fraud has not only eroded tax justice but also crippled legitimate investment and competition. Genuine economic actors, who operate transparently and pay their taxes, are being crushed under the weight of monopolies and rent-seeking cartels.
Unless a structural change in Iran, this vicious cycle will persist. Like a cancer, it has infiltrated Iran’s economy, and it seems that it will continue to metastasize.
