Iraqi government faces backlash over fuel price hike and celebrity taxation

Iraqi government faces backlash over fuel price hike and celebrity taxation
Some Iraqi economists suggest that price hikes and new taxes are due to pressure from international bodies like the World Bank.
3 min read
27 March, 2024
The announcement ignited a storm of reactions on social media. [Dana Taib Menmy/TNA]

In a strategic manoeuvre to overhaul fiscal strategies, the Iraqi government raised prices on two critical types of automotive fuel and extended its tax reach to encompass select companies and celebrities. However, the move has sparked widespread anger among Iraqis, highlighting growing discontent over economic policies.

Iraqi Prime Minister Mohammed Shia al-Sudani presided over a cabinet meeting on Tuesday, during which it was decided to raise prices on car fuel by approximately 30% for premium gasoline and 25% for super quality fuel. The adjustments are slated to take effect by early May.

The council's decision entails an increase in the price of premium gasoline from 650 to 850 dinars per litre, and super gasoline from 1000 to 1250 dinars per litre, commencing 1 May. While government sources denied immediate plans to raise prices on regular and poor-quality gasoline, scepticism among Iraqis regarding potential future hikes looms.

The announcement ignited a storm of reactions on social media, with platforms like X (formerly Twitter) witnessing a surge in calls to oppose the decision. While some welcomed the move, arguing it primarily affects affluent individuals who use premium fuel for luxury vehicles, others voiced vehement opposition, citing the broader impact on the populace.

Speculations abound regarding the motives behind the price hike, with some Iraqi economists suggesting pressure from international entities like the World Bank. However, official statements from such institutions regarding the matter are yet to surface.

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In a groundbreaking development, the General Tax Authority in Iraq disclosed plans to extend tax collection to 85 new entities, previously exempt from such obligations. The list includes taxi companies, advertising firms, celebrities, hotels, and restaurants.

According to Ali Wael Alawi, the head of the General Tax Authority, taxes will be imposed on sectors like airport taxis, Careem taxis, and car rental companies, which were previously untouched by taxation. The cabinet has greenlit a 15% tax on these entities, marking a significant shift in fiscal policy.

While objections arose from certain quarters, several economic experts highlighted the potential benefits of taxing these categories. They anticipate enhanced state revenue, strengthened oversight mechanisms, and improved collaboration among Iraqi institutions beyond the tax authority.

Dargham Mohammed Ali, an economic expert, told Al-Araby Al-Jadeed, The New Arab's Arabic sister language, about the need for coordination and licensing mechanisms to effectively regulate tax collection from these sectors.

He underscored the significance of these revenues as supplementary income for the state budget, diversifying income sources beyond oil-dependent sectors.

As Iraq navigates these fiscal adjustments, the repercussions of these decisions on the economy and public sentiment remain the subject of intense scrutiny and debate.

This report provides a comprehensive overview of Iraq's recent fiscal manoeuvres, shedding light on the implications for citizens and the broader economic landscape.