At a Glance

• The decision to implement upfront tax and fee deductions on foreign financial remittances goes into effect.
• The implementation of the ASYCUDA customs system in the Kurdistan Region will end the collection of double customs taxes from traders.
• The cost of transporting goods to Iraq has increased by 10% due to regional tensions.
• Financial remittances at the Central Bank of Iraq are delayed by up to 60 days due to a U.S. dollar shortage.

Channel8 has learned that starting September 1, traders in the Kurdistan Region will face a new financial system in which taxes and fees will be deducted before money is sent abroad, coinciding with rising transportation costs due to regional tensions and the rerouting of commercial shipping fleets.

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Key Statements and Focus Areas

• Sirwan Mohammed, a food import merchant and former president of the Slemani Chamber of Commerce, stated that starting September 1, taxes and fees will be officially deducted from financial remittances made for importing goods.
• Currently, traders pay taxes twice: once during remittance to Iraq and a second time at the Ibrahim Khalil customs gate, but the ASYCUDA system will unify this process.
• For food items, a 5% customs tax and a 1.5% remittance tax on the total amount will be collected upfront as a deposit.
• The process of completing remittances at the Central Bank takes 50 to 60 days, which has caused financial losses for traders.

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Iraq is currently facing a shortage of US dollar liquidity alongside a decline in oil revenues, while restrictions on dollar shipments by the United States have caused remittances to take a significant amount of time. 

Because traders are provided dollars at the official rate of 1,320 Dinars, they are forced to endure the Central Bank's lengthy waiting periods to finalize their commercial invoices.

Due to the regional war and tensions involving Iran, the import route for goods has shifted toward the Sultanate of Oman and from there to the Port of Um Qasr, a change that has increased transportation costs by 10%.

This increase in transportation costs and upfront taxes will have a direct impact on raising the prices of goods in the markets of the Kurdistan Region.

Kurdistan Region Customs Revenues Drop Amid Regional Tensions 

The monthly customs revenue of the Kurdistan Region currently does not reach 100 billion Dinars. 

Due to the war involving Iran, revenues at the Bashmakh, Haji Omaran, and Parvez Khan border crossings have decreased. 

Additionally, the gap between the market and bank exchange rates of the U.S. dollar has had a negative impact on the revenues of the Ibrahim Khalil border crossing.

FYI

Following an agreement between KRG and Iraqi government, the ASYCUDA electronic system will be implemented across all customs gates in the Kurdistan Region starting October 1.

The minutes have been finalized and await Council of Ministers approval, after which they will be officially circulated by the government.

According to the new agreement, 50% of the customs revenues from the gates will go to the federal government treasury.

Six border crossings between Erbil and Baghdad remain disputed, and a joint committee will make a final decision regarding them.

The implementation of the new system will ultimately lead to the removal of internal customs checkpoints between the cities of Iraq and the Kurdistan Region.

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