Baghdad Begins Steps To Reform The Tax And Customs System

 
Economic 06/16/2025  Baghdad: Dania Haider   As part of ongoing efforts to enhance economic stability and     develop non-oil resources, relevant institutions have begun taking practical steps to reform the customs and tax system to keep pace with development requirements.
 
The amendment of customs prices is part of this comprehensive reform vision. With the aim of protecting national products and supporting local industrial sectors, while simultaneously taking into account citizens' living conditions and exempting essential goods from any additional burdens.

• Developing non-oil revenues is a necessity.
 
Academic and public finance expert Dr. Ahmed Hithal told Al-Sabah that "given the high reliance on oil to finance the gross domestic product (GDP), exceeding 65%,and to cover the general budget by up to 92%,  efforts to develop non-oil revenues become an urgent strategic necessity that contributes to achieving economic stability."  

He pointed out that  "increasing customs duties as a revenue-boosting tool could contribute to this trend, provided it is designed within a comprehensive economic vision that takes into account the nature of the Iraqi market and current production conditions, ensuring the achievement of objectives without negatively impacting trade flows."  

He added,  "Theoretically, increasing customs duties could increase non-oil revenues, but this impact depends on  market flexibility,  import volume, and   importers' ability to comply with payment."

He continued, "According to the Laffer Curve,  achieving optimal tax and duty rates is essential to avoid any adverse effects, such as  traders' reluctance to import,  customs evasion, or  increased smuggling through informal ports.
 
This makes  improving collection efficiency and   expanding the customs basea more effective option than simply raising rates."  

Hathal emphasized that  "successful tax reform is not measured solely by raising rates,  but rather by achieving fairness and efficiency in collection,  so that low-income groups do not bear additional burdens through higher prices of imported goods.
 
This is where the importance of automating the customs system through the ASYCUDA program becomes clear.
 
This represents a fundamental step in  enhancing transparency,  reducing evasion and corruption, and  expanding the tax base,   ensuring social justice through a fair and equitable distribution of burdens."  

He added,  The successful implementation of the ASYCUDA system, which contributed to increasing customs revenues by more than 50% without the need for price increases, reflects the significant potential to enhance the efficiency of the state's financial management.
 
This achievement also represents a promising starting point for implementing a broader package of economic and customs reforms aimed at building a financial system that supports local production and diversifies sources of income away from excessive reliance on indirect taxes."  

He noted that  "the recent customs amendments,  while a positive step toward convergence with global standards, achieving their full impact requires in-depth study that takes into account the economic differences between Iraq and neighboring countries, as well as the need to develop a flexible and comprehensive customs policy that keeps pace with national income levels and enhances local production." 

 He concluded by emphasizing that "maximizing non-oil revenues should be based on  improving collection efficiency,  reducing tax evasion, and  expanding the tax base through automation and effective governance, in addition to  stimulating productive sectors,  to achieve balanced development that  ensures economic justice and  enhances long-term financial stability."
 
• Keeping pace with global economic developments
 
Economic expert Dr. Ikram Abdel Aziz explained to Al-Sabah that "the decision, which is based on adopting new customs price lists for goods and commodities,  came in implementation of Cabinet Resolution No. 270 of 2025, which entered into force as of June 1, 2025." 

She explained that  this decision represents an important step towards keeping pace with real global customs prices, while maintaining the percentages specified in the Customs Tariff Law as they are. She added that
 
this step carries within it many considerations that support modern financial trends and serve customs declarations and invoices submitted to banks for financial transfer purposes. Dr. Ikram emphasized that
 
the customs price increase did not include goods directly related to citizens' basic needs,
such as food and other essential goods, in line with the state's policy of caring for social segments.
 
Regarding increasing revenues, the expert explained that  "maximizing revenues through customs duties depends on the mechanisms for determining duties, which are linked to the course of fiscal policy and its directions, taking into account the social and economic dimensions resulting from them.
 
This is in addition to the role of monitoring procedures and the sound management of border crossings in ensuring the achievement of the desired returns, thus contributing to enhancing the state's revenues without harming the economic security of society." 

She pointed out that "tax reform represents an important and successful step towards enhancing revenues and achieving social justice, especially in light of the heavy reliance on oil revenues, which constitute approximately 90% of budget funding, while tax revenues currently do not exceed 2% of GDP, a modest rate compared to international standards. In this context, she stressed the importance of "providing a reliable database that includes all entities and individuals working in various economic activities,  given that the success of tax reform depends primarily on documenting actual incomes." 

She also emphasized the need to raise exemption limits for the poorest segments to protect them from any negative impacts that may result from the reforms. 

Dr. Ikram added,   "Tax reform is extremely important,  but it should not impose a heavy burden on taxpayers.
 
It aims to enhance citizen confidence in tax institutions and encourage voluntary compliance." She also emphasized the  need to "implement good governance in the management of tax revenues to ensure increased productivity of public spending,  which contributes to achieving justice and accelerating the pace of development and economic growth."
 
In the context of comprehensive economic reforms, Dr. Ikram explained that  these reforms represent part of the state's direction within the framework of the government's economic reform program,  where work is underway on eight tax-related reform packages,  alongside other reform tracks encompassing various productive and service sectors of the national economy."
 
• Support the national product
 
For his part, economic expert Dr. Duraid Al-Anzi believes that "customs duties should be imposed according to a specific mechanism, based on gradually escalating taxes on foreign goods until they are removed from the Iraqi market, in exchange for supporting domestic products to enable them to access foreign markets."  

Al-Anzi emphasized "the importance of tax reform, which should focus on imposing taxes in a balanced manner on both foreign and domestic goods, taking into account the  size of local production and  its ability to meet market needs.
 
Imposing broad taxes could lead to higher prices in local markets,  which would negatively impact citizens." He also noted that "60 to 70 percent of industrial products could be manufactured locally if full support was provided."
 
• Gradual and controlled reforms
 
The Prime Minister's Financial Advisor, Dr. Mazhar Mohammed Saleh, told Al-Sabah that  "customs authorities play a crucial role in protecting the economy within the framework of fiscal policy,
particularly in  supporting domestic production, without restricting trade flows, but rather by  directing them toward the most effective and important commodities in economic development activity." 

He added that  "raising tariffs or customs duties does not necessarily mean restricting imports or closing markets, but can be used as a regulatory tool aimed at reducing the problems of  commodity dumping and   protecting local industries, in addition to enhancing the state's general revenues."  

Saleh explained that "the overall economic objectives of amending customs tariffs are to create a fair competitive environment that does not prevent the entry of foreign products or impede free trade.
 
Higher customs tariffs can be imposed on luxury or non-essential goods,
while maintaining low or zero tariffs on basic goods and raw materials used in the production process."  

He pointed out that  "such policies contribute to   encouraging local production and   rationalizing luxury consumption, without compromising basic commercial activity, while seeking to direct imports toward what achieves the greatest benefit and productivity for the national economy as a whole."  

Saleh emphasized that "what is most important in this context is that the adjustment of customs duty rates be gradual, allowing markets to adapt to the changes,  while ensuring that duties are applied precisely and selectively rather than across the board."
 
He concluded his remarks by emphasizing that "raising customs tariffs,  if done rationally, transparently, and with good governance,does not conflict with free market principles.
 
Rather, it is consistent with smart policies that regulate trade and support economic development,
without imposing arbitrary restrictions on the movement of goods entering Iraqi markets."  https://alsabaah.iq/116001-.html