BAGHDAD: Iraqi government’s taxation of imported goods from the Kurdistan Region has had a worrying impact on Kurdish trade and retail industries, substantially cutting down the volume of imports from neighboring Turkey, according to Kurdish business leaders and officials. Data from the Kurdish ministry of trade and industry shows that imports from Turkey have fallen by nearly a quarter to $3.3 billion last year, down from an estimated $4.2 billion in 2015. The downward trend is of particular concern for business leaders in Erbil since Turkish goods constitute an estimated 56 percent of total imports to the Kurdistan Region and a decline of trade between the two countries will have an immediate impact on the merchandise in Kurdistan, according to officials.
Free movement of goods between the Kurdistan Region and Iraq was restricted in June last year after authorities in Baghdad installed customs stations on the highways connecting Kurdish cities to the rest of Iraq, levying fees on trucks and carriers with imported products heading south. The Iraqi action was in part a retaliatory response to what Baghdad has described as “irregularities on the borders” between Turkey and the Kurdistan Region. It accused Erbil of stripping the Iraqi government of revenues collected at the Ibrahim Khalil border gate with Turkey. Baghdad has said the revenues made at Ibrahim Khalil should be submitted to Iraq’s central government, something the Kurdistan Regional Government (KRG) has rejected and called “unconstitutional.”
The KRG says that, according to the constitution, revenues from its border gates with Turkey and Iran should be collected by the Kurdish government. “Imposing tariffs on imported goods from Kurdistan Region is simply unconstitutional and illegal. This issue has been politicised to harm the Kurdish economy,” said Najiba Najib, a Kurdish lawmaker in the Iraqi parliament who is also a member of the investment and financial committee of the assembly. The installation of customs stations along the Kurdish borders with Iraq essentially means double taxation of imported products which has already deterred many traders from further business between Turkey and Iraq. Chief executive at Raman Co., a private Kurdish firm representing Toshiba in Iraq, said the double tariffs had blocked their plans for expansion in the country. “We do not have the same level of free movement of our products as in the past. Our goods are more expensive now than before because of these tariffs,” said Saman Muhamad, adding that both customers and traders will equally suffer. Turkey is Kurdistan Region’s largest trading partner and Turkish companies dominate several sectors including its much needed construction branch. The volume of trade between the Kurdistan Region and Turkey was estimated at around $8 billion in 2013 before the financial crisis hit the region.