Shafaq News

Iraq’s recent tax and customs measures —introducing charges ranging between 5% and 30% on selected imported goods— have reopened a long-simmering debate over fiscal reform, placing the government at the center of a delicate balancing act between urgent revenue needs and fragile living conditions. While officials insist the steps do not amount to “new taxes,” market reactions tell a different story, as price volatility, trader anxiety, and public confusion expose deeper structural and institutional strains within the Iraqi economy.

At stake is not only the success of a set of fiscal tools, but the state’s capacity to impose reform without triggering economic disruption or social backlash in a country where nearly 90% of public revenue still comes from oil, leaving the budget highly exposed to external shocks.

Read more: Iraq’s economy in 2025: Oil dominance and delayed reforms

Official Denials and Political Sensitivities

From the outset, government officials and allied lawmakers sought to contain public anger by rejecting claims that the measures represent new taxation, as already affirmed by the country’s General Customs Authority. Member of parliament Ahmed Karim Al-Delfi insisted that what is underway is not the imposition of fresh taxes, but rather the collection of tax deposits to be settled later through electronic customs procedures.

“There are no new taxes on imported goods at the moment,” Al-Delfi told Shafaq News, stressing his rejection of any levies on essential goods or services. He attributed the controversy to misinformation and the circulation of outdated footage that misrepresented the new mechanisms.

This narrative aligns with Prime Minister Mohamed Shia Al-Sudani’s position, as he said that tax reform is significant to investors and companies, noting that the government is firm in re-establishing the business environment, while indicating that “the problem is related to the tax reality,” rather than putting more taxes.

The denial reflects Iraq’s political reality. The word “tax” remains deeply associated with protest movements, declining purchasing power, and fears of social deterioration, making narrative control a core element of fiscal policy rather than a secondary concern.

Read more: Iraq’s delicate maneuver: Boosting revenue without crushing consumer power

What Measures Target—and What They Avoid

According to economic expert Osama Al-Tamimi, the government’s recent measures targeted specific sectors rather than basic consumer goods. Taxes were applied to gold, electric vehicle imports, and gasoline-powered cars, while reports suggesting that medicines would be taxed were denied by the Ministry of Health.

Al-Tamimi explained to Shafaq News that the government is increasingly viewing taxation as one of the few available tools to address revenue shortages, particularly as oil returns struggle to keep pace with expenditure. At the same time, he stressed that imposing taxes on food staples remains politically and socially untenable, given their direct impact on daily life and the state’s reliance on the ration card system to preserve minimum living standards.

This distinction has formed a central pillar of the government’s defense, alongside repeated assertions that the measures constitute administrative “organization” rather than new fiscal burdens.

Structural Pressures Behind the Shift

The renewed push toward taxation is rooted in long-standing structural weaknesses. Iraq’s fiscal model remains overwhelmingly dependent on oil, while salary obligations, pensions, and social spending continue to rise steadily.

This imbalance has eroded financial flexibility, exposing the state to oil price fluctuations and global market disruptions. These domestic constraints intersect with an unsettled international environment marked by economic slowdown, trade disputes, and tighter customs regimes, developments that amplify the sensitivity of import-dependent economies like Iraq to any changes in tariffs, taxes, or currency flows.

Within this context, the government’s turn toward non-oil revenue reflects a growing recognition that oil alone can no longer sustain public spending indefinitely.

Read more: Deficit soars, projects freeze: Iraq heads into 2026 with NO BUDGET

ASYCUDA and Customs Reform Equation

Economic expert Safwan Qusay placed Iraq’s measures within a broader global trend, pointing to escalating trade tensions and revisions to customs systems worldwide. He cited US-imposed tariffs and retaliatory steps by China, Canada, and Japan, alongside policy adjustments in Gulf states operating within dollar-based financial frameworks.

For Iraq, Qusay argued, the centerpiece of reform is the rollout of ASYCUDA, an automated customs management system that covers most foreign trade procedures, designed to regulate imports, verify invoices, and track financial transactions.

By restricting access to dollars to legitimate trade activities, the system aims to curb customs evasion, invoice manipulation, and undocumented imports that have long distorted the market. Qusay noted that resistance has largely come from traders operating outside formal frameworks, some of whom have sought to magnify fears of price hikes.

While he did not rule out limited price increases, Qusay urged compliant traders to rely on official dollar channels, emphasizing that Iraq’s foreign currency reserves remain at historic highs and are capable of defending the dinar if speculation is contained and enforcement is applied uniformly.

A Reform Postponed Too Long

Economist Ahmed Abd-Rabbu described the current measures as a delayed but unavoidable correction. Speaking with our agency, he argued that similar reforms should have been implemented nearly a decade ago, warning that postponement has only increased their disruptive impact.

Abd-Rabbu said that comprehensive and uniform enforcement could generate up to seven trillion Iraqi dinars in annual revenue. Failure to proceed, he warned, could ultimately leave the government unable to meet salary obligations, transforming fiscal reform from a policy option into a necessity.

He also noted that preparations for the new tax framework —scheduled for January 2026 and expected to cover roughly 6,000 imported goods— have already produced a market shock. Some traders halted sales or suspended imports in anticipation of higher costs, increasing demand for hard currency and pushing activity toward parallel markets.

Inflation Fears and Market Volatility

Economist Bassem Jameel Antoine offered a more cautious outlook, warning that the new taxes could fuel monetary inflation that may prove difficult to reverse. In an interview with Shafaq News, he described current price movements as “disguised speculation,” driven less by real economic costs than by opportunistic behavior.

Antoine confirmed that rising dollar demand comes at a time of weak purchasing power and heavy public debt, cautioning that without addressing deeper structural imbalances, Iraq risks prolonged market instability.

The Real Test: Enforcement and Trust

Beyond the debate over inflation or revenue, the unfolding controversy highlights a more fundamental challenge: Iraq’s limited capacity to enforce reform evenly. Partial application across border crossings risks rewarding informal traders while penalizing compliant businesses, undermining confidence in the system, and amplifying resistance.

Ultimately, the success of Iraq’s tax and customs measures will depend less on their technical design than on credibility, communication, and institutional coherence. Reform imposed without trust risks being perceived as punishment rather than a necessity.

Written and edited by Shafaq News staff.