Iraq's cabinet has approved a bill that will slap foreign oil firms with a minimum 35% corporate tax in a bid to boost government revenues, government spokesman Ali al-Dabbagh said Wednesday.
"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 in a statement.
"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%.
"This agreement on the draft law will guarantee Iraq's rights in imposing taxes on companies contracted to extract oil and it will ensure that these taxes will be used for the national income," Dabbagh said.
"The Oil Ministry presented this draft law in order to be approved, because this will support to the national economy," he added.
Oil prices have dropped to around $60 a barrel from above $145 a barrel in March 2008, putting huge pressure on Iraq's budget, which derives 90% of its revenues from the energy sector.
In April, Iraq approved a revised $58.9-billion budget for 2009, after billions were wiped off spending plans because of the sharp fall in oil prices.
Iraq hopes to be able to pump 6 million barrels a day, up from its current stated output of around 2.2 million, within the next four to five years as new projects come online.
Some deals with foreign firms have been signed but progress in the conflict-ravaged country, which has the world's third largest proven reserves of oil with more than 115 billion barrels, has been slow.