2025-12-29T23:57:11+00:00
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Shafaq News
Iraq is facing increasing economic pressure as the
government seeks to expand non-oil revenues while safeguarding citizens’
purchasing power. Public spending continues to climb, and the country’s heavy
reliance on oil income leaves the budget exposed to swings in global energy
prices.
Non-oil tax revenues remain modest at around 3.7 trillion
Iraqi dinars ($2.5B), compared with total public spending exceeding 150
trillion dinars ($101B), a gap that underscores Iraq’s continued dependence on
oil as the main source of state financing.
Within the government’s response, economic experts describe
the strategy as centered on improving tax collection and limiting evasion
rather than imposing new direct levies. The approach includes incorporating
previously unregistered economic activities into the formal system and widening
the use of electronic taxation.
Even without new taxes, some measures are expected to affect
citizens indirectly. Freelancers and small traders, in particular, may face
higher obligations than in past years, reflecting the challenge of boosting
state income without eroding Iraqis’ purchasing power.
Read more: Cash outside banks, debt on the rise: Iraq’s fiscal challenge
The Oil Breakup
Mouin Al-Kadhimi, a former member of the parliamentary
Finance Committee, told Shafaq News that the government has been preparing tax
reforms for more than a year to strengthen non-oil revenue streams. “At
present, about 90% of Iraq’s income comes from oil,” he noted. “Non-oil
revenues must increase gradually to avoid shocks if oil prices decline.”
He referred to the tax authority’s transition to a new
automated system, arguing that it must carry out its mandate professionally
while avoiding undue pressure on taxpayers in Baghdad and other provinces.
Al-Kadhimi projected annual tax revenues of no less than 5
trillion dinars ($3.4B), in addition to 5 trillion dinars ($3.4B) from customs,
2 trillion dinars ($1.3B) from the media and communications authority, and
further income from electricity, water, and other ministries. Combined, he
estimated total annual revenue at roughly 20 trillion dinars ($13.5B).
At the same time, he cautioned that these steps could be
felt by consumers, particularly through import-related charges linked to trade
volumes of about $70B a year, noting that stronger state revenues could
translate into higher prices in local markets.
Equity over Revenue
Economist Basim Jamil Antoun framed taxes, alongside fees
and customs duties, as a core pillar of public finance that also connects
citizens to the functioning of the state.
He explained to Shafaq News that greater public
understanding of how taxes support services, salaries, and pensions is
essential for maintaining fairness and trust in the system, stressing that
moderate taxes aligned with income levels allow the state to operate
effectively.
Read more: Rumors and panic: What’s really behind Iraq’s financial scare?
Impact on Citizens
Economist Ahmed Abdul-Rabbie observed that the government
has opted to activate deferred levies while tightening enforcement and
broadening the tax base.
He assessed that measures such as formalizing unregistered
activities and expanding electronic taxation could lift revenues by 10–20%
without placing excessive strain on citizens.
Still, Abdul-Rabbie pointed out that freelancers and small
traders are likely to shoulder heavier obligations than before, noting that
proposals for wealth taxes or major restructuring of the income tax system
remain suspended because of their social and economic sensitivity.
“2026 is expected to center on stabilizing Iraq’s tax
framework,’’ he concluded, stressing that collection efforts must be matched by
visible improvements in services to support economic stability and reduce
exposure to oil price volatility.
Read more: Without oil: Iraq’s economic future hanging in the balance
