Iraq’s Tax Authority Hit with Massive $2.5 Billion Embezzlement Scandal

A massive scheme has been uncovered, in which a network of businesses and officials embezzled an astonishing $2.5 billion from Iraq’s tax authority, despite multiple layers of safeguards. This scandal poses an early test for Iraq’s new government, formed late last month after a prolonged political crisis.

The Scheme Unfolds

According to auditors, the theft was orchestrated by a broad network of officials, civil servants, and businessmen who have links to powerful political factions in Iraq’s deeply-rooted patronage system. The scheme came to light when an internal audit by the Finance Ministry alleged that the General Commission for Taxes had fraudulently paid 3.7 trillion Iraqi dinars (approximately $2.5 billion) to five companies.

How it was Carried Out

The payments were made through 247 checks cashed between September 9, 2021, and August 11 of this year, from a branch at the state-run Rafidain Bank located within the tax commission. The account held billions of dollars in deposits made by companies that were supposed to be returned to them once taxes had been deducted and the companies had presented updated financial statements.

The Embezzlement Scheme

The embezzlement scheme is believed to have unfolded over several months, with officials and businessmen using fake documents to claim payouts from the account. Auditors were unable to follow the money further because it was withdrawn in cash. The findings suggest a broad network of tax officials and businessmen must have conspired to orchestrate the theft.

Accountability Remains Unclear

Despite the discovery of the embezzlement scheme, it remains unclear who will ultimately be held accountable. Two officials at the tax authority have been detained, and the judiciary has seized several properties and millions of dollars in assets. However, officials say it’s unlikely that an embezzlement scheme of this scale could unfold without the knowledge of higher-ups.

Political Factions Under Scrutiny

Political factions in Iraq have long jockeyed for control of ministries and other government bodies, which they then use to provide jobs and other favors to their supporters. The current government has only recently come together, following a year-long political crisis that saw street fighting and deadly clashes between rival factions.

Implications for the Country

Any attempt to hold political leaders accountable for the fraud could spark further unrest in the country. The scandal serves as an early test for Iraq’s new government, which must navigate these complex issues while also addressing the country’s many challenges.