Mahmoud Ahmadi-Nejad bowed to a week-long revolt by Iran's bazaar traders, one of his country's most powerful institutions, by suspending a new taxation law -yesterday.
The president ordered the economy ministry to suspend the imposition of value added tax until later notice, when the government might implement it "correctly".
Iran's parliament approv-ed the tax on all goods except basic commodities, such as bread, fuel, dairy products and sugar, last year but began its imposition only two weeks ago.
The 3 per cent levy provoked an angry response from jewellers in Isfahan, Iran's third largest city, with a population of about 1m, who started the protest on Saturday by refusing to open shop.
Other traders in Isfahan's bazaar followed suit, as did jewellers in three other cities: Mashhad, Tabriz and Tehran. The traders complained that the new tax would push up prices further and discourage sales. The president was already under pressure for failing to curb inflation of 29.4 per cent.
"Isfahan has turned into a dead city, with [only] grocers and pharmacies rem-aining open," said a journalist. Traders had threatened that their next step would be to withdraw their money from banks, which could trigger a financial crisis.
The government sent Ali Akbar Arab-Mazar, the deputy economics minister for taxation, to Isfahan to pacify the traders but his negotiations with the merchants to reopen the bazaar failed to bear fruit.
Protests in Iran's bazaars have been rare but effective. Traders played a significant role in protests preceding the 1979 Islamic revolution.
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