Erbil, Baghdad reach deal on tax exemption for Kurdistan-based industries

Shafaq News/ The Kurdistan Regional Government (KRG) and Iraq's federal government have reached a deal to resolve a longstanding dispute over tax exemptions in the semi-autonomous region.

The KRG's Ministry of Finance said in a statement that the agreement included "recognition of the Kurdistan Region's tax exemption by the federal government."

The deal also addressed the issue of taxes paid by Kurdistan factories selling goods in southern and central Iraq. Under the new agreement, these factories will only pay taxes on their income in Kurdistan.

Other provisions included resolving the issue of subsidized fuel supplies for KRG factories and establishing a unified mechanism for tax collection.

Since 2017, Baghdad has been implementing a comprehensive strategy aimed at consolidating power in Iraq, utilizing legal, financial, political, and military pressures against the KRG.

The Iraqi federal government has from time to time withheld the KRG's share of the budget, as Baghdad contested the legality of the region's independent crude sales via an export pipeline to Turkiye. In February 2022, the Supreme Court ordered the KRG to hand over its oil to Baghdad and ruled the region's 2007 oil and gas law, which paved the way for independent oil exports, unconstitutional.

Then in March 2023, Turkiye halted some 400,000 b/d of Kurdish crude exports, after a Paris-based arbitration court said Ankara had violated the 1973 Iraq-Turkiye pipeline agreement by allowing the independent Kurdish sales.

Furthermore, in June, the Iraqi parliament passed a budget law that obliges the KRG to export up to 400,000 b/d through SOMO in order to receive 12.6% of the Iraqi budget.

With the pipeline still shuttered, the KRG has not come anywhere close to the obligated volumes, as the international oil companies operating in the region have been limited to local sales of crude at significant discounts.