This study analyses the causes behind the difficulties encountered by Iraqi economy in rebuilding, provision of value added tax (VAT), formation and implementation effects in case of applying it to the Iraqi markets. In contrast to accounts that lay stress on Iraq’s statist past, we argue that the sustained decline in formal institutions and poor tax administration is the best explanation for Iraq’s economic decline. In addition to the selected micro-economic interventions, we recommend policies that more dependably and equitably distribute oil rents, such as a universal basic value added tax collection. Our recommendations thus contrast sharply with the approaches that emphasize a reduced role by the state. The aim is to facilitate the development of VAT model under conditions of lowered conflict and greater stability, a binding constraint on development for Iraqi economy. The development process for the VAT operational management in Iraqi markets. VAT operates as a transactional sales tax, often compliance in Iraqi market jurisdiction can be compromised where purchasers are a part of a scheme that operates a fraud mechanism or where supplies are made to consumers without any physical presence in destination countries. In this context, enforcement nexus must be reinforced through several mechanisms suggested in the literature.