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Iraq Should Boost Non-Oil Tax Revenue: IMF

by Mary Swire,, Hong Kong

11 August 2017

Iraq should take advantage of the "large room" to increase non-oil tax revenue by broadening the tax base and modernizing tax and customs administration, the International Monetary Fund (IMF) has said.

The IMF said that despite measures being introduced to expand the flat tax rate on wages, the country had made "limited progress" in diversifying its tax revenues.

In February this year, the IMF identified dependence on oil revenue, overreliance on direct taxes, widespread tax exemptions, complicated tax and customs codes, and sub-par administrative capacity as key factors behind weak tax collection.

It also recommended priority measures that could be implemented immediately while the administrative capacity of the tax and customs administrations is strengthened.

These included:

  • Levying excise taxes on products or services deemed easy to tax such as telecom and hotel services, private vehicles, sugar-sweetened drinks, cigarettes and other tobacco products, and alcoholic beverages;
  • Reducing the number of tariffs in the customs code from 10 to a maximum of three rates not exceeding 30 percent;
  • Removing income tax holidays;
  • Capping the tax on corporate revenues at one percent to two percent;
  • Taxing retirement income;
  • Limiting customs exemptions;
  • Introducing a tax payers office specifically for wealthy individuals; and
  • Revamping IT systems for tax collection.

Following the recommendations, Iraq's Government agreed to introduce low taxes on certain products and services and update its sales and excise tax law.

TAGS: individuals | tax | law | tariffs | International Monetary Fund (IMF) | Iraq | services

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