The US has stepped up attacks on oil trucks in Syria in an effort to hit a major source of funding for ISIS. But that’s likely not nearly enough to significantly affect the terrorist group’s bottom line.
A recent report in The New York Times shows that ISIS (also known as the Islamic State) pulls in hundreds of millions of dollars from “taxing” and extorting those who live in the territory the group controls in Iraq and Syria.
ISIS is thought to make as much as $800 million or $900 million from residents and businessmen in its territory, American and European officials told The Times. And this revenue isn’t easy to diminish since it has “so far proved largely impervious to sanctions and air raids,” according to The Times.
Experts have long said that taxation and extortion is ISIS’ main revenue source, but The Times showed the extent to which ISIS is entrenched in the cities and towns it has seized.
Since ISIS markets itself as a legitimate state complete with the functions of any other government bureaucracy, the militants have created a complex financial system to extract as much money as possible from individuals and businesses. ISIS charges import taxes, rent for businesses, fines for breaking laws, utility bills, and income tax.
The Times also provided some specific examples of how ISIS runs this operation inside its territory:
- In a neighbourhood in Mosul, Iraq, ISIS has transformed a police station into a market and charges vendors 2.8 million Iraqi dinars, or roughly $2,500, per year to rent a stall.
- In ISIS’ de-facto capital of Raqqa, Syria, the “Office of Services” collects a “cleaning tax” of about 2,500 to 5,000 Syrian pounds, or about $7 to $14, from merchants.
- ISIS also charges for utilities like water and electricity, and residents go to “collection points” to pay their bills. Those usually total about 800 Syrian pounds, or roughly $2.50, for electricity, and 400 pounds, or about $1.20, for water.
- ISIS’ “Office of Resources” controls the group’s oil and smuggling operations, in addition to businesses like soft-drink plants, mobile-phone companies, textile and furniture workshops, and factories that produce chemicals, cement, and tiles.
- ISIS also skims revenue from small businesses, demanding a cut of their profits.
- ISIS charges an income tax of about 10%.
- ISIS imposes various fines and fees for services or infractions including car-registration, college textbooks, traffic violations, and smoking.
And the money ISIS makes from extortion comes in addition to revenue it is gaining from oil smuggling (estimated to bring in about $500 million), looting banks (which brought the group a one-time windfall of $1 billion), and kidnapping. The group also smuggles antiquities to sell on the black market.
Though extortion and taxation is bringing in plenty of money for ISIS in the short term, it may not sustainable in the long run.
The Times reported in a separate story this week that ISIS’ statehood project is under serious strain. The group is scrambling to recruit professionals who can operate oil equipment, keep the electricity running, and perform medical care.
Without these basic necessities, it’s likely that residents will continue fleeing ISIS territory for Europe and surrounding countries, which could leave fewer people inside ISIS-controlled cities and towns for the group to tax.
Daveed Gartenstein-Ross, a counterterrorism analyst at the Foundation for Defence of Democracies, told Business Insider in September that Muslims are fleeing ISIS territory “in droves” as the group falls short of promises to provide satisfactory government services.
Residents fleeing is enough of a problem that ISIS released a barrage of propaganda earlier this year targeting refugees and telling them to come join the “caliphate” instead of fleeing to “xenophobic” Europe.
And people are already struggling to pay ISIS’ heavy taxes. ISIS is thought to have imposed taxes of as much as 50% on the salaries of government employees, which led the Iraqi government to stop paying people who live in ISIS-controlled territory, according to Newsweek.
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