The Impact of the Financial Authority of Provincial Councils on the Occurrence of Double Taxation

Abstract

Abstract:

The 2005 Iraqi Constitution laid the foundational framework for a federal state in Iraq following the collapse of the former regime in 2003. It delineated the structure and powers of the federal authorities, the regions, and the governorates not incorporated into a region. However, certain constitutional provisions concerning the distribution of powers are characterized by overlap and contradiction, which has led to varied interpretations. This is despite the Constitution’s clear intent to establish a functional federal system and facilitate the formation of regions.

One significant constitutional development is the granting of extensive powers to governorates not affiliated with a region—powers that closely resemble those of the regions themselves. Although the Constitution adopts administrative decentralization in managing these governorates, some provisions deviate from this principle. Notably, provincial councils have been granted legislative authority, including precedence over federal legislation in areas of shared jurisdiction. This legislative power inherently includes the authority to impose local taxes and fees, which may subject residents of certain governorates—as well as foreign investors and residents—to local levies in addition to federal taxation. This raises the potential for double taxation and administrative confusion.

Given this context, the primary aim of this study is to examine the implementation of administrative decentralization in Iraq by analyzing relevant constitutional and legal texts. The research seeks to identify contradictions within these texts regarding the authority of provincial councils to impose local taxes and fees. It further investigates the federal government’s practices in restricting this constitutional jurisdiction. The study concludes that administrative decentralization does not inherently conflict with granting governorates taxing authority, provided such powers are clearly defined through federal legislation. It also recommends avoiding temporary provisions in annual budget laws that grant short-term fee-imposing powers and emphasizes the importance of strengthening local administrative institutions to enhance their leadership and governance capacities at the governorate level.