Contractors accuse Iraq of shake downs to force tax payments

US military contractors in Iraq have accused Baghdad of using strong-arm tactics to force them to pay exorbitant taxes. (AP)
Updated 25 September 2017
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Contractors accuse Iraq of shake downs to force tax payments

WASHINGTON: American military contractors operating in Iraq are accusing Baghdad of employing strong-arm tactics to make them pay exorbitant income taxes, a practice they’ve warned the Trump administration is hampering the fight against Daesh.
To force payment of the taxes, which the companies say are haphazardly calculated and can total millions of dollars, Iraqi authorities have held up — and even threatened to stop altogether — delivery of essential supplies, including food, fuel and water, bound for US and coalition forces, according to interviews and documents obtained by AP.
Iraqi government officials also have refused to issue, or have delayed, the delivery of work visas to employees of companies that won’t hand over the money.
A senior executive at a US company that supports American troops in Iraq said contractor vehicles are stopped at checkpoints frequently and ordered to produce documents that certify they’ve paid the taxes or prove their company has received an extension from Iraq’s tax commission. The executive spoke on condition of anonymity to avoid retaliation from the Iraqi government for speaking out publicly.
He said the Iraqis typically calculate the tax bills by first determining the total value of the contract and then charging 20 percent of what they estimate the company’s gross revenue would be. That can lead to eye-popping yet wildly inaccurate totals as high as $20 million. The big number is really aimed at getting the company to agree on a smaller yet still substantial amount, the executive said.
Najiha Abbas Habib, director general of Iraq’s tax authority, rejected the allegation US contractors are being gouged. American companies working in Iraq are not exempt from taxation, she said, adding that Iraq’s tax rates are actually lower than other Middle East countries.
“Many foreign companies operate in Iraq without paying any taxes at all,” Habib said.
Robert Mearkle, a spokesman for the US Embassy in Baghdad, denied the tax demands have undercut the counterterrorism mission. “Iraqi enforcement of tax laws has not disrupted US efforts to defeat ISIS,” he said in a statement.
But a trade group representing a number of the contractors told Secretary of State Rex Tillerson several months ago that the tactics present a “direct threat to the US government’s mission in Iraq.” The Professional Services Council also said in the previously undisclosed May 1 letter to Tillerson that the arbitrary way the Iraqis are collecting the taxes heightens the potential for fraud and waste in a country that already ranks as one of the most corrupt in the world.
David Berteau, president of the Professional Services Council, estimated that the Pentagon spent about $1 billion in just the past year on contracts with about 20 US companies for support in Iraq. The work ranges from supplying US and coalition bases to construction and weapon system maintenance.
Berteau said the companies either seek reimbursement from the US government for the taxes or build the expense into the price they charge on the contract.
“Either way, US taxpayers eventually foot the bill,” Berteau said.
But the Trump administration hasn’t confronted senior Iraqi officials over the matter. Tillerson, in a brief response he sent the organization in early July, said a diplomatic note between the two countries approved in 2014 during the Obama administration gave US government personnel but not contractors protections from Iraqi law.
Tillerson said the US Embassy in Baghdad routinely engages with the Iraqi government “to ensure fair treatment” of the US contractors working there. But he also said it is “always important that US companies follow local laws,” which include the payment of taxes.
And Tillerson gave no indication the Trump administration would pursue what US companies with overseas contracts really want: an agreement with the Iraqi government that gives them exemptions from the taxes and other legal protections to shield them from being prosecuted in Iraqi courts.
Iraq’s push for the taxes has coincided with a sustained drop in oil prices. Oil revenue makes up nearly 95 percent of Iraq’s budget, but the country has been reeling under an economic crisis since 2014, when prices began falling from a high of above $100 a barrel.
The seizure of territory across Iraq by the Daesh group in 2014, including the fall of Mosul, worsened the situation. Badly needed resources have been diverted from productive investment to fight a long and costly insurgency.
US Central Command, which oversees military operations in Iraq, referred questions to the State Department. The command declined to provide a list of the US companies in Iraq with Defense Department contracts.
— AP


China, UAE strike 13 landmark deals

Updated 17 sec ago
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China, UAE strike 13 landmark deals

  • Among the projects agreed in the memorandums of understanding are the building of embassies and cultural centers
  • China also won approval for the first Chinese state-owned financial services firm to be opened in Abu Dhabi’s AGDM financial center

LONDON: The UAE and China have signed 13 wide-ranging agreements to advance trade and commercial ties between the two countries.

Among the projects agreed in the memorandums of understanding are building embassies and cultural centers, increasing cooperation in the energy, agriculture and e-commerce sectors, building a wholesale market for livestock, fisheries and farm produce and investing in the world’s largest solar energy project.

China also won approval for the first Chinese state-owned financial services firm to be opened in Abu Dhabi’s AGDM financial center, according to the UAE state news agency WAM.

The agreements were ratified during the visit of President Xi Jinping, the first president of China to visit the UAE is 29 years. The top-level visit, in which he had talks with Mohammed bin Zayed, crown prince of Abu Dhabi, and Sheikh Mohammed bin Rashid, vice president of the UAE and ruler of Dubai, is a clear indication of the importance China attaches to relations between the two countries.

China is the UAE’s second largest trading partner. About 60 percent of China’s exports to the Middle East enter the region via the UAE, which itself accounts for about 25 percent of China’s trade with all the Arab world.

The UAE is also close to the route of China’s Belt and Road initiative. The multibillion-dollar project aims to revive the ancient Silk Road and develop an equivalent sea route linking China to markets in west Asia and Europe.


More than a million Chinese visited the UAE in 2017 and trade reached nearly $54.5 billion that year. On Thursday, Sheikh Mohammed bin Rashid tweeted that the UAE aims to double both of those numbers.
“We have many areas of political and economic agreements and a solid base of projects in the energy, technology and infrastructure sectors. More importantly (we have) a strong political will to start a greater phase of cooperators ad integrations,” the ruler of Dubai wrote on Twitter.

“Today, we have exemplary relations with China and a Chinese leadership that sees the UAE as main strategic partner in the region.”

President Xi arrived in Abu Dhabi on Thursday for a three-day visit. On the same day, the state-owned Abu Dhabi National Oil Company (ADNOC) announced the awarding of two contracts worth $1.6 billion to BGP Inc., a subsidiary of China National Petroleum Company, to conduct a seismic survey, searching for oil and gas sites both offshore and on an area covering some 53,000 square kilometers.

Dubai-based property developer Emaar meanwhile announced plans to build the largest Chinatown in the Middle East in the UAE.

After his three days in the UAE, President Xi will go on to Senegal, Rwanda and South Africa.

FACTOID

UAE-CHINA AGREEMENTS - Two MoUs for the construction of embassies and cultural centres - Agreement to advance energy cooperation - Two MoUs to enhance e-commerce ties - Two MoUs to enhance agriculture sector - Two MoUs connected to the Silk Road Initiative - Agreement between ADNOC and China National Petroleum Company - Agreement on customs issues - Framework agreement between the Abu Dhabi Global Market and the Chinese-UAE Pilot Zone - A partnership and investment agreement in the world's largest solar energy project