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Any foreign company who wants to work in Iraq will be subject to a minimum of 35% corporate tax according to Ali Al Dabbagh, a spokesman for the Iraqi government.
“The Council of Ministers decided to approve the draft law on income tax on foreign oil companies based on the provisions of two constitutional articles,” Al Dabbagh is reported by news agency AFP as saying.
“This agreement on the draft law will guarantee Iraq’s rights in imposing taxes on companies contracted to extract oil, and it will ensure that these taxes will be used for the national income.”
“The oil ministry presented this draft law in order to be approved, because this will support the national economy,” he added.
The move will not please foreign oil companies currently operating in Iraq. They are currently being charged a flat rate of 15%.
The move comes as the Iraq Oil Ministry lurches from one crisis to another. Iraq’s Oil Minister Hussein al-Shahristani has been summoned to parliament to explain the huge shortfall in oil revenues, while oil and gas contracts signed by the Kurdistan Region have been rejected by Baghdad.
The Iraq Oil Ministry’s unorthodox oil contracts have also proved to be extremely unpopular with international firms.
Samuel Cisuk is the Middle East energy analyst for IHS Global Insight. He believes that a number of factors have contributed to the current crisis enveloping Iraq’s oil industry.
“The Iraqi Oil Ministry has sacrificed short-term repair and refurbishment work on its producing fields for a licensing-round-only strategy, which was always going to be a drawn-out affair given the lack of existing frameworks and terms that needed to be set before actual licensing could go ahead,” Cisuk said.
“Iraqi production has suffered in the meantime, as the brain-drained and depleted national oil industry has been unable to counter reservoir damage and crumbling production infrastructures,” he added.
Cisuk also said that Iraqi oil exports have fallen by 250,000-300,000 barrels per day, further aggravating an already terse situation and causing widespread discontent among many of the country’s MPs.
“The main unifying criticism against the Oil Minister and his policies comes from the inability to launch upstream and downstream development on a large scale over recent years,” Cisuk said.
