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too early to predict what the result of the recent Exchange Control Law will
be.
7. The Government policy aims at the formation into a monopoly of
almost every branch of trade and centralisation in the hands of companies
wholly or partly controlled in Tehran. During the past three years shops have
been licensed for sale of matches. Sugar was formerly a Russian monopoly T
but later import was permitted generally against a special licence. Companies
were then formed in each town through which sugar was sold locally. For
a long time a Government monopoly of import of cotton piece-goods was
expected and it was finally put into force in 1935. The principal agents for
Japanese shipping companies and exporters at Khorramshahr was appointed
local representative of the central organisation at Tehran and he obtained
important concessions. The Trade Agreements with Japan and with the
Union of Socialist Soviet Republics have provided for supply by those two
countries of the greater part of the textile requirements of the Iranian market,
and companies have been formed in Tehran and in the provinces for local sale.
Various Co-operative Syndicates have been formed for import and export of
particular commodities. In spite of all this centralisation, local merchants
by participation in the various companies and by acting as transitaries still
manage to make some profit, and the Banks report that they handle more
business each year. But prosperity depends mostly on the demand from up-
country.
8. Government investment in agricultural and industrial enterprises in
Khuzistan will be mentioned later in this report.
9. The effect of restrictions and of Government regulations of imports
and of currency hae been to make smuggling one of the leading local industries.
The very highest officials are said to be involved. The public is thus able to
obtain a large part of its requirements of sugar, tea, cotton and silk goods and
various prohibited articles at low prices and large profits have been and are
being made by merchants in combination with smugglers by land and by sea.
This provides employment for many and numerous small merchants only
continue to exist through the failure of the Authorities to stop it. Spies have
been sent to Basra and to Koweit to obtain information of intended con
signments ; the Iranian Navy from time to time captures a dhow A term adopted by British officials to refer to local sailing vessels in the western Indian Ocean. with con
traband ; a Customs Preventive Department has been organised ; shop and
house searches are carried out from time to time. But the Government seems
impotent to keep control over such extensive land routes and sea coast and
there is no doubt that Customs and other officials and road guards are well
compensated for turning a blind eye and bribery secures the release of manv
offenders.
10. Similarly there has been extensive smuggling of silver and other
currency out of the country, which hats only diminished since silver was with-
djuvn from ciiculation. In this also, arrangements with officials have proved
all too easy.
11. The effect of these evasions has been to keep down the cost of living
a little and certainly to make living conditions for Europeans more endurable.
It has doubtless a harmful effect on the economic calculations of the Govern
ment, though the fines inflicted from time to time go part way towards making
up the revenue defrauded. The most unfortunate effect is the temptation to
which sundry officials are subjected, and there are few who do not avail them
selves of such a golden opportunity. There is little likelihood of anv
diminution of smuggling so long as the present high tariffs and restrictions
exist.
12. Taxation, both national and local, weighs heavily on most classes of
the population. Tn-come tax and direct charges on imports and exports have
increased during the last three years, the former being extended to incomes
of Rials 200 per month which affects the great majority of wage earners.
The result has been that less cash has been available for trade purposes, those
able to do so having kept capital abroad and surplus money invested in
landed property which has remained undeveloped. Purchasing power has
been greatly reduced and in consequence only the cheapest of articles find a
icady sale. Assessments are frequently unfair and tax collectors susceptible
to bribery if payment is deferred. The Authorities at one time announced
that land devoted to agricultural purposes would not be taxed : later they
demanded arrears. The registration tax on motor vehicles was collected but