Iraq's digital payment shift slows as small businesses fear new tax burden

BAGHDAD, Iraq — Iraq's transition to electronic payments in retail and daily commerce is being driven less by technical choice than by the need to reduce the risks of handling cash, even as small and medium-sized businesses keep their distance from digital tools over fears of new tax and financial obligations. Experts say electronic payments prevent cash from remaining in the informal economy, channel money into the formal system, ease tax collection, support anti-money-laundering efforts and allow the state to monitor consumption data. However, distrust of the banking sector, patchy internet and electricity infrastructure, small merchants' reluctance to pay transaction commissions and the lack of consumer protection legislation have all slowed the shift. Analysts argue that the government is treating digital transformation as a purely technical process while postponing the administrative reforms that would challenge the entrenched cash economy and existing bureaucratic structures. Electronic payments, they note, can strengthen financial transparency and discipline while making it easier to trace corruption. Iraq, the analysis concludes, stands at a critical crossroads between an emerging economic model shaped by citizen demand and its long-standing reliance on cash, with the pace of change now tied as much to tax and regulatory policy as to technology.