By: AGBI

Iraq plans to reduce taxes on oil companies operating in the country, as existing tax laws have “scared off” many foreign operators, an official has revealed.

The reduction is part of a national tax law being devised by the Arab nation’s supreme committee for tax reform (SCTR) in line with recommendations by the Arab Monetary Fund.

SCTR chairman Abdul Hussein Al-Ankabi described the taxation of oil companies as a “complicated issue” that requires a profound study before a modified tax is enforced, according to the Iraqi News Agency.

“This is a principal and complex issue … the tax imposed on oil companies had in the past scared off some of them and forced others to consider exiting Iraq,” he said.

Al-Ankabi did not mention the current tax on oil firms or the new tax levels planned. 

In 2010, Iraq’s cabinet approved a tax of 35 percent on all foreign oil companies awarded contracts in Opec’s second-largest oil exporter.

The income tax on foreign oil companies in Iraq, which controls the world’s fifth-largest recoverable crude deposits, covers all contracts related to oil and gas exploration and production. This includes contracts for the exploration, development and production of exploratory blocks and oil and gas fields, seismic surveys, drilling wells, technical operations, well injection facilities and flow lines.

The envisaged reduction in oil corporate taxes coincides with intensified plans by Iraq to develop its hydrocarbon sector. Over the past two years, Baghdad has awarded nearly 30 oil and gas development contracts to several foreign companies, including BP, TotalEnergies and Chinese companies.

The move comes as Iraq prepares for parliamentary elections in November.