With the end of war, a key issue will be the Iraqi tax system. Under Saddam Hussein, sales from the state-run oil monopoly provided all the revenue that the government needed for what little it did. The interim authorities will need revenue to pay for police, fire-fighting and other basic services. Hence, a tax system will need to be put in place quickly.
Russia faced a similar situation after the fall of the Soviet Union. Although the old Soviet Union had a tax system, it existed to control inflation rather than provide government revenue or to change the distribution of income.
The Russian government, under extreme pressure from the International Monetary Fund to raise revenue in order to get inflation under control the central bank was just printing money to cover large deficits raised tax rates, imposed many new taxes and put extreme pressure on tax evaders.
Leaders of the new Iraq are said to be looking at a flat rate tax system for their country, according to an April 14 report in Tax Notes.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, April 21, 2003.
For text http://www.ncpa.org/edo/bb/2003/bb042103.html
For more on Taxes & Growth http://www.ncpa.org/iss/int/
FMF Policy Bulletin/22 April 2003
