Shafaq NewsIraq’s recent tax and customsmeasures —introducing charges ranging between 5% and 30% on selected importedgoods— have reopened a long-simmering debate over fiscal reform, placing thegovernment at the center of a delicate balancing act between urgent revenueneeds and fragile living conditions. While officials insist the steps do notamount to “new taxes,” market reactions tell a different story, as pricevolatility, trader anxiety, and public confusion expose deeper structural andinstitutional strains within the Iraqi economy.At stake is not only the success ofa set of fiscal tools, but the state’s capacity to impose reform withouttriggering economic disruption or social backlash in a country where nearly 90%of public revenue still comes from oil, leaving the budget highly exposed toexternal shocks.: Iraq’s economy in 2025: Oil dominance and delayed reformsOfficial Denials and PoliticalSensitivitiesFrom the outset, governmentofficials and allied lawmakers sought to contain public anger by rejectingclaims that the measures represent new taxation, as already affirmed by thecountry’s
General Customs Authority. Member of parliament Ahmed Karim Al-Delfiinsisted that what is underway is not the imposition of fresh taxes, but ratherthe collection of tax deposits to be settled later through electronic customsprocedures.“There are no new taxes on importedgoods at the moment,” Al-Delfi told Shafaq News, stressing his rejection of anylevies on essential goods or services. He attributed the controversy tomisinformation and the circulation of outdated footage that misrepresented thenew mechanisms.This narrative aligns with PrimeMinister Mohamed Shia Al-Sudani’s position, as he said that tax reform issignificant to investors and companies, noting that the government is firm inre-establishing the business environment, while indicating that “the problem isrelated to the tax reality,” rather than putting more taxes.The denial reflects Iraq’s politicalreality. The word “tax” remains deeply associated with protest movements,declining purchasing power, and fears of social deterioration, making narrativecontrol a core element of fiscal policy rather than a secondary concern.: Iraq’s delicate maneuver: Boosting revenue without crushing consumer powerWhat Measures Target—and What TheyAvoidAccording to economic expert OsamaAl-Tamimi, the government’s recent measures targeted specific sectors ratherthan basic consumer goods. Taxes were applied to gold, electric vehicleimports, and gasoline-powered cars, while reports suggesting that medicineswould be taxed were denied by the Ministry of
Health.Al-Tamimi explained to Shafaq Newsthat the government is increasingly viewing taxation as one of the fewavailable tools to address revenue shortages, particularly as oil returnsstruggle to keep pace with expenditure. At the same time, he stressed thatimposing taxes on food staples remains politically and socially untenable,given their direct impact on daily life and the state’s reliance on the rationcard system to preserve minimum living standards.This distinction has formed acentral pillar of the government’s defense, alongside repeated assertions thatthe measures constitute administrative “organization” rather than new fiscalburdens.Structural Pressures Behind theShiftThe renewed push toward taxation isrooted in long-standing structural weaknesses. Iraq’s fiscal model remainsoverwhelmingly dependent on oil, while salary obligations, pensions, and socialspending continue to rise steadily.This imbalance has eroded financialflexibility, exposing the state to oil price fluctuations and global marketdisruptions. These domestic constraints intersect with an unsettledinternational environment marked by economic slowdown, trade disputes, andtighter customs regimes, developments that amplify the sensitivity ofimport-dependent economies like Iraq to any changes in tariffs, taxes, orcurrency flows.Within this context, thegovernment’s turn toward non-oil revenue reflects a growing recognition thatoil alone can no longer sustain public spending indefinitely.: Deficit soars, projects freeze: Iraq heads into 2026 with NO BUDGETASYCUDA and Customs Reform EquationEconomic expert Safwan Qusay placedIraq’s measures within a broader global trend, pointing to escalating tradetensions and revisions to customs systems worldwide. He cited US-imposedtariffs and retaliatory steps by China, Canada, and Japan, alongside policyadjustments in Gulf states operating within dollar-based financial frameworks.For Iraq, Qusay argued, thecenterpiece of reform is the rollout of ASYCUDA, an automated customsmanagement system that covers most foreign trade procedures, designed toregulate imports, verify invoices, and track financial transactions.By restricting access to dollars tolegitimate trade activities, the system aims to curb customs evasion, invoicemanipulation, and undocumented imports that have long distorted the market.Qusay noted that resistance has largely come from traders operating outsideformal frameworks, some of whom have sought to magnify fears of price hikes.While he did not rule out limitedprice increases, Qusay urged compliant traders to rely on official dollarchannels, emphasizing that Iraq’s foreign currency reserves remain at historichighs and are capable of defending the dinar if speculation is contained andenforcement is applied uniformly.A Reform Postponed Too LongEconomist Ahmed Abd-Rabbu describedthe current measures as a delayed but unavoidable correction. Speaking with ouragency, he argued that similar reforms should have been implemented nearly adecade ago, warning that postponement has only increased their disruptiveimpact.Abd-Rabbu said that comprehensiveand uniform enforcement could generate up to seven trillion Iraqi dinars inannual revenue. Failure to proceed, he warned, could ultimately leave thegovernment unable to meet salary obligations, transforming fiscal reform from apolicy option into a necessity.He also noted that preparations forthe new tax framework —scheduled for January 2026 and expected to cover roughly6,000 imported goods— have already produced a market shock. Some traders haltedsales or suspended imports in anticipation of higher costs, increasing demandfor hard currency and pushing activity toward parallel markets.Inflation Fears and MarketVolatilityEconomist Bassem Jameel Antoineoffered a more cautious outlook, warning that the new taxes could fuel monetaryinflation that may prove difficult to reverse. In an interview with ShafaqNews, he described current price movements as “disguised speculation,” drivenless by real economic costs than by opportunistic behavior.Antoine confirmed that rising dollardemand comes at a time of weak purchasing power and heavy public debt,cautioning that without addressing deeper structural imbalances, Iraq risksprolonged market instability.The Real Test: Enforcement and TrustBeyond the debate over inflation orrevenue, the unfolding controversy highlights a more fundamental challenge:Iraq’s limited capacity to enforce reform evenly. Partial application acrossborder crossings risks rewarding informal traders while penalizing compliantbusinesses, undermining confidence in the system, and amplifying resistance.Ultimately, the success of Iraq’stax and customs measures will depend less on their technical design than oncredibility, communication, and institutional coherence. Reform imposed withouttrust risks being perceived as punishment rather than a necessity.Written and edited by Shafaq Newsstaff.