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- Saturday, 08-31-2024, PM 12:52
- Karar Al-Asad
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Tax evasion in Iraq has taken many forms, including registering fictitious companies in the names of "ignorant and naive" people who have no knowledge of what is happening, and using devious and fraudulent methods against state institutions, leading to huge losses estimated at billions of dollars annually. Iraq, the second largest producer of crude oil in OPEC after Saudi Arabia, with an average daily production of 4.6 million barrels under normal conditions, relies on crude export revenues to provide 90% of the state's financial income, while the rest of the revenues, including taxes, constitute about 10% of treasury revenues. A recent study at the University of Baghdad showed that tax capacity was measured as an average between 2005 and 2020, and it was found that tax policy in Iraq is characterized by its low level of performance and its inability to create tax reform mechanisms during the previous period. The International Monetary Fund directs demands to Iraq to expand the scope of the tax base, control the general financial situation, the public sector wage bill, and increase non-oil revenues. These are a set of demands presented by the International Monetary Fund to the Iraqi government during meetings held in the Jordanian capital, Amman, with Iraqi financial and economic officials last February, which aim to achieve economic stability and gradually move away from the near-exclusive dependence on oil revenues. The Fund said that to overcome the fluctuations in oil prices, Iraq must achieve high economic growth to absorb the growing workforce, enhance non-oil exports, and control the wage bill. However, although taxes are one of the sources of financing for the Iraqi treasury, they are still beyond government control and are exposed to corruption, evasion, and fraud, whether by officials or influential figures, and thus Iraq is exposed to major losses. The tax trusts case that was revealed at the end of 2022, starring "Nour Zuhair" and during which more than $5 billion was embezzled and stolen, while MPs say the total amount could reach $10 billion, was a blow to the tax sector locally and internationally. Companies resort to defrauding the state "We have a file of thousands of companies that have not submitted taxes after several years of accumulation and that owe large sums," says Soran Omar, a member of the parliamentary economic committee, explaining that these companies "provide very modest sums to ignorant people in exchange for opening a company in their names, while this naive person does not know the details, in terms of being a company founder or authorized director and having a fingerprint and signatures." Omar notes that "large sums are owed by these fraudulent companies, and arrest warrants have been issued against them, and they have cut off the ration card items from these naive people, and when he visits the ration card department, he complains about this because he is poor, has no source of income, and his salary is limited as an employee or worker, or he may be unemployed."
Official authorities, after summoning the heads of these "naive" companies, tell him that he is a merchant with large capital and billions of dinars in accumulated taxes, but he is surprised by that, according to Soran Omar.
The member of the parliamentary economic committee points out that "these fake companies enter the currency auction or import various materials, but they are fake and in the name of an ignorant person with lists of accumulated taxes," explaining: "We have files regarding the ignorant persons." Fake companies in the names of 5,000 people from Sulaymaniyah He adds that "only about 5,000 people in Sulaymaniyah and its outskirts have registered fake companies in their names, and they owe taxes in imaginary amounts, and they have not submitted a single dinar to the tax departments," adding that the fraudsters convince "naive" people with an amount that may not exceed 200 dollars in exchange for signing and submitting their official papers in order to register the fake companies in their names.
Soran Omar points out that "there are those who establish companies in this way under the names of ignorant people, and they enter the currency auction and import materials with fake invoices," adding that "when the time comes to submit the tax, they call the company manager, who is surprised by what is happening without his knowledge." A company with a capital of 11 billion dinars in the name of a member whose salary is 500 thousand. Soran Omar also reveals that "the capital of one of the companies is 11 billion dinars, and it works in all fields, but it is registered in the name of a Peshmerga member whose salary does not exceed 500 thousand dinars," explaining that "this file was referred to the Integrity Commission, and there are also companies registered in the names of deceased people."
MP Soran Omar addresses another method of fraud, saying, “There are those who ask them to open an account at the Middle East Bank in Sulaymaniyah and convince them to benefit from a monthly amount in exchange for presenting their identification papers and signature, and an account is opened in their name, and then they forge seals and signatures for lawyers and open companies in their names,” adding that “thousands of companies resort to this to launder money and other things.”
He also explained: “I worked on the issue of the telecommunications companies’ tax, and I have a file on this issue, as they did not submit the taxes they owed to the state, which are estimated at billions of dinars, so I transferred the file to the Minister of Communications.” $26 billion wasted due to tax evasion On December 6, the “Tax System Reform in Iraq” conference was held under the patronage of Prime Minister Mohammed Shia al-Sudani, during which he announced the waste of $26 billion due to tax evasion in the country.
He said in a speech that "the total imports, according to the Ministry of Planning's data, indicate imports worth $42 billion of machinery, goods and products," noting that "the Central Bureau of Statistics' data indicate imports worth about $16 billion, which means that $26 billion were not subject to customs duties and taxes."
The Tax Reform Conference, held last December, resulted in the formation of a committee to follow up on the implementation of tax reform pursuant to the Cabinet decision of February 5, 2024. The Integrity Commission investigates tax evasion. However, the Integrity Commission confirms that it is investigating tax evasion by following up on issues related to this matter, as the Director of the Media Office of the Integrity Commission, Ali Muhammad, says, “Any crime that is considered a waste of public money in the state, whether tax evasion or otherwise, the Commission moves and investigates it.”
He stressed that "if this is proven, the Integrity Commission will refer it to the investigating judge, and then it will turn into a case, after which legal action will be taken against the violators."
Regarding the sources from which the Integrity Commission receives files, Ali Mohammed points out that "the Commission has several outlets to receive information in this regard, including the hotline, e-mail, the complaints box, through representatives, or through press monitoring." 18 Ports Departments Follow Up on Evasion Files On the other hand, the Border Ports Authority confirms that it has more than 18 departments that follow up on such fraudulent matters, as the official spokesman for the Commission, Alaa Al-Din Al-Qaisi, says that "the measures taken by the Border Ports Authority in this regard are that the Commission always emphasizes the scrutiny of all procedures in the departments operating under it, which number more than 18 departments."
Al-Qaisi explains that “the efforts of the Ports Authority are clear in monitoring, supervising and auditing all customs and tax transactions, even the issue of wheels without a model, medicines and food items that enter the citizen’s daily life, and the Authority emphasizes the production date and the validity of the materials.”
He points out that "the Authority's procedures are strict in this regard, and we scrutinize everything issued by these departments, and we scrutinize their dates and the accuracy of their issuance, for the purpose of protecting the citizen and preserving the security and safety of the country."
Al-Qaisi stresses that "any delay or any forgery of unsuitable materials that enter under a different name or change the description of the goods, all detainees or the operating department responsible for this file will be referred to the judiciary, by taking legal measures against them and then referring them to the judiciary."
In Iraq, the contribution of tax revenues to financing the general budget is weak, compared to the contribution of taxes in regional and other countries.
The head of the General Tax Authority, Ali Waad Allawi, pledged to move to keep pace with the tax systems after achieving security stability in Iraq, stressing that the authority was able to achieve high growth rates in tax revenues. In the first quarter of 2023, the authority was able to achieve a growth rate of 149%, and also increased the growth in real estate revenues in Baghdad and the governorates by about 75% compared to the previous year. Source: Rudaw Digital + Al-Marasid
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