Iraqi government rejects traders' demands to end ASYCUDA customs system

The Iraqi government has refused traders' requests to cancel the UN-backed ASYCUDA customs system, which was introduced to modernise border controls and reduce smuggling.

Protesting shopkeepers claim the ASYCUDA system has increased tariffs and costs, urging the government to abandon it. Officials maintain the reforms are intended to unify customs procedures, raise state revenues, and close loopholes that have enabled smuggling and corruption.

MP Diaa Shaghati al-Zaidi, of the Construction and Development Coalition led by Prime Minister Mohammed Shia' al-Sudani, dismissed the protests as an attempt to "muddy the waters" and stated the government would not reverse its implementation of the system.

The Construction and Development Bloc also defended the measures, accusing some traders of spreading misinformation out of self-interest. The bloc stated that recent customs procedures did not impact food traders but targeted practices that allowed some importers to evade duties.

Iraq faces persistent structural challenges in its economy and public finances, despite significant oil wealth. Chronic liquidity issues have sometimes delayed civil servant salaries. The country depends on oil exports for about 90 per cent of state revenue and imports most consumer goods.

Lately, Iraqi authorities have uncovered schemes involving traders connected to political elites who imported basic goods, such as infant formula, using falsified customs documents to obtain US dollars from the Central Bank at the official rate. These dollars were then smuggled to neighbouring countries or sold on the parallel market at higher rates, thereby depleting Iraq's hard-currency reserves.

Baha al-Araji, head of the bloc, told the Iraqi News Agency (INA) that ASYCUDA was introduced to unify all border crossings under a single system. He noted that many traders previously imported goods through the Kurdistan Region, where customs duties were lower, and revenues did not reach the federal government.

"When this system was applied, traders began paying customs duties everywhere, including at crossings in the Kurdistan Region," al-Araji said. He added that objections were motivated by private interests rather than the public good.

The General Authority of Customs announced on Wednesday that revenues exceeded 137 billion Iraqi dinars in January, attributing the increase to the implementation of Decision 957 across all customs centres. It said revenues were expected to rise further in the coming months following a reduction of the value rate in the ASYCUDA system to 25 per cent, alongside measures to accelerate customs procedures.

The authority rejected social media claims that the new tariff caused revenue losses, stating the reality was "entirely the opposite."

Prime Minister Mohammed Shia' al-Sudani has ordered the formation of a committee to coordinate with the Kurdistan Region tax authorities to unify tax procedures and address double taxation and tax evasion, with the aim of increasing non-oil revenues.

Iraqi and Kurdish officials were not immediately available for comment when contacted by The New Arab.