Revealing the loss of $179 Billion from Iraq’s Money

Imports Manipulation

During his participation in the conference on tax system reform in Iraq, Prime Minister Mohammed Al-Sudani revealed that “the total imports for 2022, according to the International Trade Center data, amounted to $42 billion.
However, the Central Bureau of Statistic’s data indicates $16 billion, implying that $26 billion did not undergo tax or customs duties.”
Al-Sudani emphasized that a significant part of the problem lies in evasion, deception, and circumvention by traders and businessmen of the tax system. He explained that many traders turn to the parallel market, abandoning the official exchange rate and the central bank’s electronic platform to avoid taxation or comply with international standards in official financial transactions through banks.
However, upon scrutinizing the import volume for the period between 2012 and 2022, significant discrepancies emerged between the data from the Central Bank of Iraq and the Central Bureau of Statistic. These discrepancies, repeating annually with massive gaps amounting to $179.25 billion, raise questions about the true scale of imports in Iraq, where the central bank sells dollars.

Al-Sudani expressed surprise at reports of forged invoices, finding it perplexing that daily import volumes could reach $300 million. He linked the dollar smuggling to the reported exaggeration of import sizes and clarified that despite the central bank reducing dollar sales to $30 million, goods have not vanished from the markets.
Providing an example, Al-Sudani mentioned the exaggeration in iron quantities registered in import invoices, stating that it was more than enough to cover the entire expanse of Iraq.
This aligns with reports from the U.S. Treasury about the illegal activities of some Iraqi banks in obtaining dollars and using them in money laundering operations.
The U.S. Treasury prohibited 18 Iraqi banks from trading in dollars and imposed strict standards on imports through the compliance platform, scrutinizing the ultimate beneficiary of imported goods and the legitimacy of the importing companies.
Auditing import invoices resulted in the rejection of over ninety percent of invoices deemed inaccurate or non-compliant with compliance standards. This contributed to the rise in the dollar’s value against the dinar, exceeding 1650 dinars per dollar.

The Truth About Tax Evasion

However, Prime Minister Al-Sudani suggested in his recent speech that the difference between the International Trade Center and Central Bureau of Statistic data might be due to tax evasion by traders and businessmen.
While a considerable number of traders resort to currency exchange shops to obtain dollars, avoiding compliance procedures on the platform, import figures for the period between 2012-2022 demonstrate that the data discrepancy is not a recent issue; it existed before the implementation of compliance standards.
In addition to this, the surge in import figures to record levels, disproportionate to the population or local demand, paints a clear picture of the scale of forgery and manipulation in import invoices.
In 2013, Iraq’s population was 35 million, and import figures were $63.32 billion, according to the Central Bank. However, these numbers were $29.94 billion less when compared to the Central Bureau of Statistic’s data, which stood at $33.38 billion.

These illogical figures become even more apparent when compared to the current situation, nearly a decade later.
In the past year, 2022, the population increased to 42 million, while import figures reached $42 billion according to the International Trade Center, significantly lower according to the Central Bureau of Statistic at $16 billion.
Al-Sudani’s discussion of tax evasion raises numerous questions about Iraq’s tax system, especially following the so-called “heist of the century,” which unveiled the theft of $2.5 billion from tax trusts. It exposed a vast network involving banks, politicians, and manipulators within the Iraqi economy. The $26 billion Al-Sudani mentions in tax evasion surpasses the heist’s amount tenfold and equals 17% of the 2023 budget.

Money Laundering

With the difficulty of dollars leaving Iraq and significant restrictions imposed by the U.S. Treasury on external transfers, a substantial portion of these funds may have turned into money laundering operations within the Iraqi economy.
This might explain the significant increase in the number of shoping malls, restaurants, and high-priced real estate filling Baghdad without contributing to Iraq’s economy in vital sectors like agriculture and industry.
This situation is a catastrophe for the Iraqi economy. Tax evasion of this magnitude indicates the presence of large mafias and specialized networks operating in both the banking and tax systems. They provide cover for numerous traders and companies and have extensive relationships with politicians and armed groups that facilitate their operations and ensure protection.
For Iraq, attempting to control the dollar and prevent dinar depreciation, recovering these amounts would significantly improve its national currency’s value.
It would also deter further instances of tax evasion, especially considering they have been occurring for over a decade, involving staggering amounts that surpass the budgets of larger economies in the region. Addressing this issue is crucial for the economic stability and growth of Iraq.
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