Iraq Government spokesperson Ali al-Dabbagh has said that the country’s cabinet has granted a bill that will impose a minimum 35% corporate tax on foreign oil companies with the intention of increasing revenues.
Foreign companies operating in Iraq now pay a flat tax rate of 15%.
The draft law will need parliamentary approval but agreement on it will assure Iraq's rights in imposing taxes on companies contracted to extract oil.
The agreement will guarantee that the taxes will be used for national income.
"The Council of Ministers decided to approve the draft law on income tax on foreign oil companies based on the provisions of two constitutional articles," Dabbagh said.
"It takes into account the recommendation of the State Consultative Council to add an article for the income tax law of 1982 of not less than 35%.”
"The oil ministry presented this draft law in order to be approved, because this will support the national economy," Dabbagh added.
Oil prices fell from more than $145 a barrel in March 2008 and are now fluctuating at about $60, putting huge pressure on Iraq's budget which derives 90% of its revenues from the energy sector.
In April 2009 Iraq granted a revised $58.9bn budget for 2009, after billions were wiped off spending plans due to the sharp fall in oil prices.
Iraq expects to be able to produce six million barrels a day (bpd), up from its present stated production of about 2.2 million bpd, within the next four to five years as new projects come online.
Few deals with foreign companies have actually been signed, although Iraq and Egypt agreed to broad-stroke an agreement to increase oil exploration and development in Iraq.