Moody’s: Delay in tax reforms risks slowing progress

AMMAN — International rating agency, Moody’s, has warned that more delays in tax and other economic reforms jeopardises the progress made so far in Jordan’s economic correction programme.

In a report e-mailed to The Jordan Times on Monday, the agency, which rates Jordan at B1 stable, said: “While we ultimately believe that delay and revision of the proposed tax reform is a more likely outcome than outright and permanent removal of the measures, the delay risks slowing progress achieved in consolidating government finances under the IMF programme since August 2016”.

It explained that a diminished scope for continued fiscal consolidation raises the risk that Jordan’s debt burden, which reached 95.3 per cent of GDP in 2017 from 70.7 per cent in 2011, will not stabilise as previously envisaged due to the inadequate domestic revenues and dwindling foreign grants, despite the recently announced Gulf assistance. 

Moreover, the report said, further fiscal consolidation is needed to reduce Jordan’s high public sector gross financing needs, “which we estimate at 20.6 per cent of GDP in 2018, largely due to the rollover of short-term domestic debt”.

The agency said that in terms of revenues from income tax “Jordan stands out internationally in this regard, collecting only 0.4 per cent of GDP in personal income taxes, one of the lowest in the region, and has an income tax threshold in excess of 3x GDP per capita, more than triple that of many regional peers, according to the IMF”.