Home » Context of 'September 19, 2003: Paul Bremer Establishes Flat Tax in Iraq'
Context of 'September 19, 2003: Paul Bremer Establishes Flat Tax in Iraq'
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May 1, 2003: White House Announces Appointment of Paul Bremer as US Administrator for Iraq
L. Paul Bremer. [Source: Public domain]The White House announces its intention to appoint L. Paul Bremer III as special envoy and civil administrator for Iraq. Bremer, described by media reports as an expert on terrorism, is a former managing director of Kissinger Associates (1989 to 2000). [Newsweek, 4/30/2003; Washington Post, 5/2/2003]
Entity Tags: L. Paul Bremer
Timeline Tags: Iraq under US Occupation
May 15, 2003: Paul Bremer Cancels Plan for Interim Iraqi Government
L. Paul Bremer, the head administrator of the Coalition Provisional Authority, abandons a goal put forth by Jay Garner and Zalmay Khalizad to assemble a meeting by the end of May in order to establish an interim Iraqi government. Bremer instead chooses to go with a "step-by-step" approach whereby the constitution would be drafted before elections are held. [Gordon and Trainor, 3/14/2006, pp. 479]
September 19, 2003: Paul Bremer Establishes Flat Tax in Iraq
Paul Bremer signs Order 37, titled "Tax Strategy for 2003," reducing the tax rate on corporations from a high of 40 percent to a flat rate of 15 percent. The income tax rate is also capped at 15 percent. "The highest individual and corporate income tax rates for 2004 and subsequent years shall not exceed 15 percent," the order says. [Coalition Provisional Authority, 9/19/2003 ] The flat tax has long been a goal of economic conservatives and was planned for Iraq in pre-war planning sessions with Iraqi exiles. According to one Middle East expert interviewed by the Washington Post, the new tax system "has almost no support from other members of the US-appointed Iraqi Governing Council." The new tax law will take effect in January. In the meantime, reports the Post, "Bremer has abolished all taxes except for real estate, car sales, gasoline and the pleasantly named 'excellent and first class hotel and restaurant tax.' Even while leaving these Hussein-era levies in place, Bremer exempted his coalition authority, the armed forces, their contractors, and humanitarian organizations. Exempting occupation personnel leaves only the Iraqis to pay taxes, as well as journalists, business people, and other foreigners." [Washington Post, 11/2/2003]
September 21, 2003: Iraqi Finance Minister Announces that Iraq is Up for Sale
At the annual World Bank/IMF meeting in Dubai, Iraq's nominal finance minister Kamel al-Gailani announces Bremer's shock therapy program of economic reforms. The announcement comes two days after Bremer signed a number of orders opening up Iraq's economy to foreign investment (see September 19, 2003, September 19, 2003, and September 19, 2003). Collectively, the orders allow foreign investors to acquire 100 percent ownership of Iraqi assets in any sector except oil production and refining, give foreign investors equal legal standing with local firms, and allow them to repatriate all profits made in Iraq without any requirements for local re-investment. The laws also cap income and corporate taxes at 15 percent and slash tariffs down to 5 percent, with the exception of tariffs on food, drugs, books, and other humanitarian imports, which can be imported duty-free. Al-Gailani says these "measures will be implemented in the near future and represent important steps in advancing Iraq's reconstruction effort." As an article in Economist magazine will note, the changes, which "bear the signature of Paul Bremer… and the imprimatur of the American consultants it has hired to frame economic policies," represent "a radical departure for Iraq." The article—titled "Let's all go to the yard sale"—calls these reforms "the kind of wish-list that foreign investors and donor agencies dream of for developing markets." The caption of an image accompanying the article reads, "If it all works out, Iraq will be a capitalist's dream." But the magazine also acknowledges that there will be resistance to these reforms. "Given the shock and awe expressed by many Baghdad businessmen at the scale of the changes, it is not clear that such a future regime would be able to resist pressures to reimpose protectionism." It also predicts that the rapid overlay of this legal framework over Iraq's existing economic system will create disparities. "The instant discarding of 40 years of national-socialist commercial culture is likely to create serious distortions," the magazine says. [New York Times, 9/21/2003; Daily Telegraph, 9/22/2003; Economist, 9/27/2003]
Entity Tags: Kamel al-Gailani
September 24, 2003: Iraq Administrator Calls Insurgency 'A Growing and Sophisticated Threat,' Says US Needs Twice as Many Troops Deployed
The US administrator for Iraq, L. Paul Bremer, speaks with President Bush during a dinner party. Discussing the insurgency in Iraq, Bremer warns Bush, "We're up against a growing and sophisticated threat." In his 2006 book My Year in Iraq, Bremer will write that at this time, the US only has "about half the number of soldiers we need… here." [New York Times, 4/20/2008]
Entity Tags: L. Paul Bremer, George W. Bush