Analyzing and Measuring the Impact of Customs Taxes on the Gross Domestic Product in Iraq for the Period (2004 – 2021)

The research aims to measure the impact of customs taxes on the gross domestic product in the Iraqi economy. The research covers data for a period of time, 2004-2021, and for measurement purposes, the annual data was converted into quarterly data using the (eviews10) program. The data for both variables are at the original level of the data, and it has settled at the first difference according to the Dick-Fuller method. For this reason, the Johansen method was used to estimate the co-integration in the long term. In the greatest value test, there was no integrative relationship in the long term, and these two variables were referred back according to the logic of the economic theory, and their behavior can be observed through the graph of the data of the two variables. It is known that the relationship between the two variables is a positive relationship. Positive between customs taxes and GDP, that is, the higher the customs taxes, the higher the levels of the gross domestic product, in addition to a set of recommendations, most notably working to activate the customs tax law in order to supplement the general budget with more financial resources. Unit Root, Cointegration, Johansen, Iraq.


Introduction
Iraq suffers from a major imbalance in the structure of its national economy, as the Iraqi economy is a rentier (unilateral) economy that depends on the oil sector to provide the necessary revenues to cover public expenditures, with no interest in other sources of funding, including tax revenues and customs taxes, one of the most important indirect taxes imposed on operations. It is a means of protection as the government uses it as an effective tool for regulating the economy through its contribution to financing the state's general budget, supporting the trade balance and protecting the national industry from foreign competition, as well as achieving an increase in the added value of In order to raise growth rates in the GDP and achieve economic development, and from this, it is one of the tools of fiscal policy, so the research came to focus on the impact of customs taxes on the gross domestic product.
Export tax: This type of tax is imposed on goods exported outside the country, as well as on goods that enter the free zones, and it is less important than the taxes imposed on imported goods because these taxes are linked to exceptional or emergency circumstances that the country is going through, such as wars, for example" (Wartan, 2015: 49), or goods that the state does not want to leave, such as basic foodstuffs, and the goal of this tax is to maintain goods designated for local consumption and limit their export (Al-Ani, 2018: 109). Despite its low importance, there are several characteristics that characterize this tax, the most important of which are: (Jose, 1998: 212) Ease of management. Its flexibility is high when world prices change. Protecting the national industry by raising the prices of primary raw materials for foreign industries than for national industries.
Transit tax: This type of tax is imposed on goods that cross the state borders, and these goods cannot be used for local consumption or use. These taxes are imposed at one rate on all goods regardless of their types or origins, so they are considered one of the unified taxes (Wartan, 2015: 50).

In terms of collection unit: It is divided into (Al-Ali, 2002: 139).
Value taxes: They are taxes imposed on commodities at a percentage of the value or price of the commodity, such as 5% or 10%, and they have advantages, the most important of which are: Ease and clarity of its procedures. Low management costs. It is flexible according to price changes. It is fair, as it is imposed on luxury goods.
Specific taxes: They are taxes imposed lumpy on each unit of measurement of goods (area, weight, volume) regardless of the value of those goods (Krugman, 2012: 195). An example of this is the imposition of a tax of $5 per ton of wheat, and it has the most important advantages: Ease of management. Specialized in good varieties of goods. Its outcome is stable. Not affected by price fluctuations. It has the ability to protect the national economy, especially in periods of economic recession.
Mixed taxes: This type of tax combines ad valorem taxes and qualitative taxes in order to overcome the defects of the previous two types. And he gets 20% of its value (Sawyer, 2009: 145).

In terms of the goal: It is divided into (Al-Ali, 2022: 142):
Financing taxes: The objective of which is to provide financial resources for the state to meet the requirements of public spending. In this case, taxes include large numbers of goods that are not locally produced and goods that have a high elasticity of demand.
Protective taxes: The aim of imposing this type of tax is to protect the national industry from foreign competition.
Preventive taxes: The aim of imposing this type of tax is to limit the entry of certain types of foreign goods imported into the country, which are often harmful to society, such as alcoholic drinks, cigarettes, and other harmful goods.

Customs taxes objectives:
Countries seek, through the imposition of customs taxes, to achieve multiple goals that are not limited to the financial goal alone but also have economic, social, health, and other goals.

2.3.1Financial goals:
Financial goals are among the most important goals that governments seek to achieve as a result of imposing taxes in general and customs taxes in particular. The country has a monopoly on the production of these goods, and it is imposed on imported goods, and in particular on goods whose demand is inelastic and not produced locally.

Economic objectives:
Customs taxes have economic objectives represented by: Protection of national production, especially in the early stages of production for emerging industries, which are characterized by high production costs, and thus need protection from competition from foreign industries (John, 2004: 140).
Raising the level of employment and increasing production: the application of imposing customs taxes on imports as a protectionist policy will encourage local industries to expand production and create additional employment opportunities to absorb the unemployed labor (Pugel, 2004: 190).
Improving the rate of trade exchange: The imposition of customs tax on imports will lead to an increase in their prices and a lower demand for them compared to local goods (if the demand for the commodity is flexible and the country is influential in global markets), and this is what compels the exporting country -if it wants to maintain the same exported quantity -to reduce the prices of those goods on which the customs tax has been imposed, and thus increase the rate of trade exchange between the two countries (Wartan, 2015: 53).
Achieving economic stability: the imposition of customs taxes can contribute to the diversification of domestic production in developing countries so that they become less dependent on the global market, especially on goods that developing countries cannot control the determining factors for them, such as fluctuations in global demand or in emergency conditions, whether natural or otherwise (Khalil, 1980: 689).

Social goals:
These goals are the redistribution of wealth and income among the different groups of society in order to achieve justice and not primarily to obtain financial resources, as the goal of imposing the customs tax here is not to obtain financial resources as much as it represents the redistribution of wealth and income between the different groups of society in order to achieve justice, and this is achieved by distinguishing between necessary and luxury goods when imposing customs tax (Shameya, Al-Khatib, 1991: 141).

The relationship of customs taxes to the gross domestic product:
The gross domestic product is one of the most important macroeconomic indicators that are used in drawing up the economic policies of the country, and there is a close and direct relationship between customs taxes and GDP, and this relationship appears clear when imposing customs taxes through its direct impact on increasing production in the activities covered by customs protection (Al-Hashemi and Al-Jubouri, 2002: 12), and usually the impact of customs taxes on production is in two ways: the first is that its effects are deflationary on production, especially consumer and investment goods, through what they lead to of increasing costs and reducing profits, and consequently a decline in the level of production on the one hand, and on the other On the other hand, customs taxes affect production through their impact on the volume of investment, which depends on the volume of savings that will decrease when the tax is imposed, which reduces the volume of investment and production, and on the other hand, when customs taxes have expansionary effects on production, which leads to raising the prices of customs taxes on goods Imported goods lead to an increase in demand for locally produced goods, which raises the level of GDP in the country (Al-Ali, 2009: 260).

Analysis of the impact of customs taxes on the gross domestic product in Iraq for the period (2004-2021):
When following the data of Table (1), it becomes clear to us the fluctuation in the data of both customs taxes and gross domestic product, and this is mainly due to the heavy dependence on oil revenues without paying attention to other sources of revenue, especially customs taxes, in addition to that the country has been exposed to internal crises and shocks. And foreign affairs have significantly and directly affected the gross domestic product, as it was in the global financial crisis, as the output fell in 2009 to 130,642,187 million Iraqi dinars, after it was in 2008 about 15,702,061 million Iraqi dinars, compared to the rise in customs tax revenues in 2009 to 590688 million Iraqi dinars. Which increased the proportion of customs tax revenues to the gross domestic product to 45% after it was 23% in 2008, as well as in 2014 and 2015 and the deterioration of the political, economic and social conditions during the control of terrorist groups on some border crossings that reduced the proceeds of customs taxes to 514,636 and 416,357 million Iraqi dinars for the above two years in a row, as well as the drop in oil prices, which significantly and directly affected the GDP, which amounted to about 266,42038 4 and 207876191 million Iraqi dinars, with percentages of customs tax revenues amounting to 19% and 20% of GDP for the two years mentioned above, respectively, and then the customs revenues returned to rise in 2020 and 2021 to 1122970 and 1141358 million Iraqi dinars, respectively, and in contrast, the GDP rose to 219768798 and 301439533 million Iraqi dinars for the above two years in a row, which indicates that customs taxes have a positive relationship with GDP reinforced by the curved path of customs tax revenue and GDP in Figure (1), which move in a gradual upward direction during the study period.  2015  416357  207876191  0,20  2016  647482  196536350  0,32  2017  1236357  225995179  0,54  2018  1691737  251064480  0,67  2019  1056994  262917236  0,40  2020  1122970  219768798  0,51  2021  1141385 Table (1)

Data used:
The study aimed to show the impact of customs taxes on the gross domestic product in Iraq for the period 2004-2021 through the use of some indicators (GDP) and customs taxes (Text). Since the time series is not sufficient for analysis, which is (17) years, and for the purpose of reaching Accurate and non-false results, the annual data has been transferred to the quarterly so that the number of views is (72). The data on the subject of the study on Iraq were obtained through the website of the Ministry of Finance and the Ministry of Planning in Iraq.
We notice Figure (2), which shows the relationship between (GDP) and (text) and the extent of compatibility between them and to know whether they will go in one direction or whether there is a reciprocal direct equilibrium relationship between them in the long term or not.

Time series stability test:
The time series test was conducted using the developed Dick-Fuller method, and the test results were that the variables are stable at the first difference and for both the independent variables (custom taxes) and the dependent variable (GDP). Logarithmic data for the variables under the current study.

Unit root test:
From observing the data in Table No (2), it is clear from the Dickey-Fuller test that both variables are not static at the original level because the probability was greater than 5%, which concludes that the variables under study are not static at the original values, and therefore we accept the null hypothesis which states that there is a unit root, which requires that we take the first difference in the data and for both variables.  Table (3) The stability of the quarterly data for the variables in the first difference Source: Prepared by researchers using the data in Table (1) after converting it into quarterly data. From observing the data in Table (3), it is clear that both variables are stationary at the first difference, and this is evident by observing the probability that we find that it is less than 5%, as the probability for them reached (0.000) and for all cases, which concludes that the variables under study have become stationary at the first difference, and therefore we reject the null hypothesis and accept the alternative hypothesis which states that there is no unit root, which requires going to use the Johansen method to show that there is a co-integration between the variables under study or not, any long-term relationship or not.  Source: Prepared by researchers using the eviews10 program * Here, one is subtracted from the slowdown period because the slowdown period was determined at the level, and here the degree of slowness is one minus one, so the degree of slowness becomes zero.

Co-integration using the Johansen method:
Although the results of the time series stability test for the study variables showed that the two series are complementary to the same degree and at the first difference, the Johansson co-integration test was conducted to test and evaluate the existence of a long-term relationship between customs taxes (text) and gross domestic product (GDP), and to know the number of vectors and the nature of the relationship The balance between them in the long run, based on the Trace test, and the Maximal eigenvalue test to test the null hypothesis that there is no integrative relationship in the long run between the variables (no co-integration vectors) or not, then test the alternative hypothesis that there are two complementary relationships ( heading).
Table (4) shows the results of the (Johansen) co-integration test between (text) and (GDP), which shows the possibility of rejecting the null hypothesis that there is no co-integration vector among the study variables, as the calculated value of the impact test reached (15.7), which is greater than the value. The critical value (15.4) is significant at a level of significance less than 5%. It also shows that the calculated value of the test of the greatest characteristic values, which is (11.7), is less than the critical value at the level of significance of 0.05, which is (14.26), which is not significant at the level of significance. Less than 5% and this result do not support the results of the impact test, and thus we return to the behavior of these variables according to theory and economic logic, as we conclude from this that there is a long-term relationship at least between the variables of the study, which proves the positive impact that customs taxes exercise in Gross domestic product.

Conclusions
The time series of the dependent variable (GDP) did not settle at the original level of the data and was stable at the first difference using Dick Fuller's method.
The time series of the independent variable (customs taxes) did not settle at the original level of the data and was stable at the first difference using Dick Fuller's method.
Because of the instability of the variables at the level, but rather they were stable at the first difference, the Johansen method was used to find out whether there was a long relationship between the variables, and the delay period was determined to slow down zero for the studied variables.
The tests showed the existence of two complementary relationships between the variables in the long term, according to the impact test, and this result was not confirmed by the maximum value test. The behavior of these variables was referred to according to the logic of the economic theory of gross domestic.

Recommendations:
Working on activating the customs tax law in order to supplement the general budget with more financial resources. Encouraging local production by reducing the price of customs tax on imported production requirements and included in the production process. Providing customs protection for local production by raising the rates of customs taxes imposed on imported goods that compete with local production. Diversify sources of income and reduce dependence on oil revenues by developing the industrial, agricultural, and service sectors.