Iraq's fee-for-service crisis: Citizens pay more while receiving less

Shafaq News

08-07-2025

Shafaq News
In a country where public services were once seen as a right, Iraqis are now finding themselves trapped in a system where access to basic government functions—from hospital visits to traffic procedures—comes with a growing price tag. As service quality stagnates or deteriorates, the state's increasing reliance on citizen-paid fees has ignited anger, confusion, and a deep sense of injustice.
Burden Without Benefit
Across Iraq, citizens are paying out of pocket for services that are either substandard or absent. Hospitals charge patients and their companions for overnight stays without providing clean beds or working air conditioning. Traffic departments impose processing fees ranging from 20,000 to 100,000 IQD (about $75) for routine paperwork—despite long waits, limited seating, and no meaningful infrastructure improvements.
"Even to process a simple form, we pay, but get nothing in return," said Khuldun Hassan, a 47-year-old father from Baghdad's al-Shu'la district.
In another part of the city, Hayder Ubaid recounted how his electricity bill has soared despite frequent blackouts. "We mostly rely on private generators, but the official bill comes inflated, with added charges for things like 'receipt printing'—even when no electricity is delivered."
These are not isolated complaints. From the healthcare sector to utilities and civil paperwork, Iraqis increasingly report that fees are being imposed arbitrarily and without tangible service improvements.
Legal Ambiguity
The Iraqi Constitution is clear: taxes and fees must be imposed by law, not ministerial discretion. Article 28 of the 2005 Constitution states: "No taxes or fees shall be imposed, amended, collected, or exempted except by law." Yet, in practice, many government ministries and local agencies have bypassed this legal safeguard by creating new services—often in coordination with private contractors—and charging for them under the banner of "enhanced offerings."
Khalid al-Jaberi, a member of Iraq's High Committee for Tax Reform, explained the distinction, "A fee is supposed to correspond to a specific service. Taxes apply to regular income. But what's happening now is that many so-called fees are being applied without improving the associated service."
This distinction matters because the difference between a legal tax and an unlawful charge affects millions of Iraqis. Public institutions, especially those delegated autonomy, often interpret these rules broadly—leaving citizens with little recourse.
Part of the issue stems from the state's effort to increase non-oil revenues. In doing so, ministries have been granted authority to contract with private firms, transferring responsibility for essential services while raising fees.
"There is no justifiable reason to involve private companies in issuing passports or handling citizen data," says MP Mohammed al-Khafaji, a member of the parliamentary Legal Committee. "The only real outcome has been a steep rise in costs—without any visible service upgrade."
Penalizing the Poor
The regressive nature of this monetization strategy is stark. Whether it's paying 5,000 IQD (about $4) to visit a hospitalized relative or shelling out 240,000 IQD (about $185) to renew a car registration, the brunt falls disproportionately on low- and middle-income families.
For small business owners and traders, the situation is even more dire. MP Amir al-Maamouri noted that new taxes on imports and property were enacted without warning. "We've seen an abrupt increase in customs fees, especially at uncontrolled border crossings, where poor oversight allows for smuggling and tax evasion while penalizing legitimate traders."
According to economist Ahmed Abdul-Rahab, the cumulative effect of these policies is to alienate the very people the government depends on for revenue. "When citizens feel cheated—when they pay but receive no benefit—they stop participating. They avoid paying bills, avoid using government services, and withdraw trust."
Broken Fiscal Logic
Official estimates suggest that Iraq should be collecting up to 12 trillion IQD (about $9 billion) annually in taxes and fees. In reality, less than a quarter of that amount—about 3 trillion IQD (about $2 billion)—is ever collected. The gap is attributed to systemic evasion, underreporting, and widespread administrative inefficiency.
Much of the country's financial code remains unchanged since the early 1980s. Abdul-Rahab criticized the current tax law, first enacted in 1982 and based on a 1922 British model, as "outdated, misaligned with Iraq's social needs, and structurally unjust."
He advocated for a progressive overhaul, "Iraq needs modern tax legislation that spares low-income families and targets high-margin industries, banks, and real estate conglomerates. That's how you generate revenue without suffocating everyday life."