An Evil Plot? Basra Boycotts New Customs Tax

The current Minister of Finance in Iraq is an Iraqi Kurdish politician, Hoshyar Zebari, and, in a way typical of Iraqi politicians who tend to blame sectarian or ethnic bias, or corruption, for all the country's woes, al-Bazouni says he believes the customs duty is part of a plot to damage southern Iraq's economy while promoting the economy of the semi-autonomous northern region.

If that is the aim, then it appears to be working. Apparently the people of Basra are already heading north when they want to buy cars.

“Prices for cars in Iraqi Kurdistan are about US$4,000 to US$5,000 less than in Basra because the Iraqi Kurdish haven't applied the new customs duty,” says Ahmed al-Khaldid, a car dealer in Basra. “A lot of the new cars coming into Basra have Iraqi Kurdish licence plates.”

The customs duty doesn't only affect vehicles. All kinds of other products have also increased in price. Local economists believe that this is because hardly anything is produced locally anymore so many things are imported and therefore subject to sales taxes. Many analysts say that Iraq has had a relatively open border for imports for such a long time, that domestic industries have been badly impacted.

Local economist Abdul Rahman Hamid al-Saidi believes that the Iraqi government should be more careful about the way it introduces and implements such taxes.

“The introduction of a sales tax should be gradual and there shouldn’t be any surprises that can confuse the market,” al-Saidi told NIQASH. “And the federal government should ensure that decisions are implemented in all parts of Iraq to avoid impacting imports and speculation in domestic markets.”

Additionally al-Saidi thinks it would be a good idea to impose taxes on imported goods that could actually be made inside the country, as a way of protecting and encouraging domestic production and businesses other than the oil industry upon which Iraq is so dependent.

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