‘Heist of the century’: Iraq finance ministry loses $2.5bn in tax fraud

Baghdad’s finance ministry has found that $2.5 billion in revenue has been embezzled from the tax commission’s accounts in what Iraqi media have called the “heist of the century”.

Judicial authorities have detained businessman Nour Jassim, who, as chief executive of two of the five companies involved, received more than $1 billion according to an audit carried out by the ministry last month. Two tax officials have also been arrested, while several properties and assets worth millions of dollars have been seized.

A confidential 41-page report obtained by The Guardian and Middle East Eye website revealed that the conspiracy was mounted by influential businessmen who set up shell companies.

Without paying tax in the first place, they submitted fake documents to claim refunds from the tax commission’s accounts. The companies involved in the scheme received the $2.5 billion in 250 cheques between September 2021 and August this year. Some of the money was laundered by buying property in Baghdad’s prime residential district.

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The plot was carried out with the collaboration of tax officials, senior administrators, the state-owned Rafidain Bank and, the Guardian revealed, the powerful pro-Iran Badr organisation. All involved received pay-offs.

Former prime minister Mustafa Kadhimi’s office has been accused of protecting the illicit withdrawals by cancelling an audit of the tax commission’s accounts shortly before the first cheques were cashed.

The fraud coincided with a year of political turbulence following the October 2021 parliamentary election when the country was administered by Mr Kadhimi’s Western-backed caretaker government.

The thefts were exposed in August after finance minister Ali Allawi resigned in protest against rampant corruption. His interim replacement Ihsan Abdul Jabbar Ismail ordered a fresh audit which found there was not enough money in the looted tax account to pay legitimate refunds.

Iraq’s new prime minister Mohammed Shia al-Sudani pledged to tackle corruption as soon as he formed a government on October 27th. In 2021, Iraq was ranked 157 out of 180 on a scale where the most corrupt top the list and ex-president Barham Salih said $150 billion in oil revenues alone had been stolen and smuggled out of the country since the 2003 US occupation.

Corruption deprives Iraqis of water and electricity, healthcare, education and jobs.

Mr Sudani’s backer is Iran-allied strongman Nuri al-Maliki, whose service between 2006-2014 under US protection as Iraq’s first post-invasion prime minister entrenched corruption at all levels of government and business. Mr Maliki’s State of Law coalition is the second largest in parliament.