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