Can Iraq curb corruption among customs officials?

Corruption on Iraq's borders is robbing the government of the customs income its budget depends on.

al-monitor An Iranian truck waits to return to Iran through the Iraq-Iran border crossing of Haj Omran, northeast Iraq, Sept. 25, 2007. Photo by SAFIN HAMED/AFP/Getty Images.

Topics covered

taxes, krg, iraqi government, iraqi economy, iraqi border guard, customs, corruption, border crossing

окт 21, 2016

BAGHDAD — The head of the Security and Defense Committee in the Iraqi parliament, Hakem al-Zamili, has spoken out about the corruption prevailing over Iraq's border crossings. In a press conference held Oct. 3, he stated that the state was not benefiting from financial revenue that is directly going into the pockets of corrupt officials.

Corruption is robbing the state of potential revenue from the tariff law implemented this year to reduce the deficit in the current budget, which amounted to 24 trillion dinars ($18 billion). The General Customs Authority has announced that it had expected to collect $5 billion this year, but only $306.5 million had been received as of August. 

Alaa Matar, a food merchant from Baghdad, told Al-Monitor, “The officials at the border crossings and customs are delaying processing their goods for up to a month to force [merchants] to deal with middlemen to reduce the delay to a week.”

He said, “Border crossing and customs employees work as middlemen between the managers and merchants and get paid 1 million dinars [$766] for each transaction. When it comes to imported goods with high taxes, these middlemen coordinate with the officials to change their category to goods with low taxes in exchange for thousands of dollars that go into the pockets of the customs officials.”

Matar added, “The goods coming from the Kurdistan Regional Government to Baghdad and the southern provinces should be taxed at the main entrance to the capital, but merchants are paying $2,500 to middlemen for each car to evade inspection.”

From 2003 until the end of 2015, the Iraqi government stopped applying the tariff law and merely applied the Iraq reconstruction tax, which amounted to 5% of the value of the goods, under Resolution 38 for 2003 issued by the Coalition Provisional Authority headed by Paul Bremer.

A major conflict erupted in 2015 between the local governments in southern Iraq and the KRG and the central government when the local bodies refused to enforce the law, but Baghdad finally used its power and applied the law and set up customs points around the capital to double-check customs.

A member of Iraq’s Commission of Integrity, Mohammad Qawn, told Al-Monitor, “The Commission of Integrity invited the customs officials [to speak to the commission], which confirmed that corruption is indeed prevailing. For example, they said that only one car out of dozens undergoes government inspections while other vehicles pass without inspection as long as a bribe is given to corrupt officials.”

He explained, “The goods' classification is being altered to reduce the tax and the positions at border crossings are being bought and sold openly because they bring financial returns for some parties." He did not name them.

Qawn pointed out, “Improving the work of border crossings is very difficult at this stage because they are located in border areas far from the monitoring authorities.” He called on the government to “change the management and hold accountable those who are buying and selling positions,” adding, “The government did not benefit from the tariff law as expected. Only the corrupt officials are taking advantage of this at the expense of the Iraqi people.”

In regard to the budget for the current year, the Iraqi government confirmed that it will take in 11.9 trillion dinars ($9 billion) in non-oil revenue from tariffs and fees. But the head of the parliamentary Finance Committee, Mohammed al-Halbusi, revealed Oct. 9 the government could not access these funds, which amounted to 2.4 trillion dinars ($2 billion) that had been collected but not delivered.

Abdul-Hussein al-Anbaki, an economic adviser to the Iraqi prime minister, attributed the problems impeding the implementation of the tariff law to the doubling of the tax on imported goods and corruption among some of the staff.

“The Iraqi government has taken measures to curb corruption, but some parties are resisting and practicing extortion,” he told Al-Monitor. “The purpose of applying the law is not necessarily to support the budget, but mainly to support sectors such as industry and agriculture, because the country's economy is currently going through a recession.”

Anbaki went on, “There are obstacles facing the tariff collections by customs at the checkpoints in Baghdad, but the prime minister’s office has recently formed committees and teams to end this problem.” He stressed, “There is a good development in the KRG in terms of enforcing the customs tariff law, which is helping the KRG put an end to its financial crisis.”

Between 2003 and 2015, Iraq imported goods worth $475 billion, according to statistics from the Central Bank of Iraq.

In this regard, the Economic Committee rapporteur in parliament, Faris al-Faris, told Al-Monitor, “If corruption continues to control border crossings, it will hurt the economy because industry would remain disrupted and the foreign goods would flood the local markets while the corrupt officials get richer than the state.”

He added, “The parliament has taken action to curb corruption at border crossings by approving the law for a border crossings committee, which has been given full liberty to eliminate corruption and further monitor the border crossings as well as work on developing them. However, a conflict has erupted between the parties that wish to promote the committee’s role and those who oppose it.”

The president of the Iraqi Federation of Industries, Ali al-Saadi, told Al-Monitor, “The Iraqi state’s revenue from enforcing the tariff law currently stands at 20% of what it should be, which is a very weak proportion.” He said he hoped that “applying the law properly would positively reflect on the industry and result in reviving around 50,000 stalled industrial projects.”

Speaking to Al-Monitor, the president of the Economic Media Centre, Durgham Muhammad Ali, summarized the situation at the border crossings, saying, “The border crossings are subject to quotas, corruption and meddling by parties. Meanwhile, the state remains unable to apply the tariff law as it lacks control.”

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