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Credit the people with intelligence

Jun 24,2019 - Last updated at Jun 24,2019

One of the greatest failings of governments anywhere is bad memory, or the assumption that the people are forgetful.

For instance, in November 2016, Omar Razzaz wrote in a local daily: “Jordan must work to come out of the present bottleneck not by raising taxes but by raising production of exportable goods and services, raising employment in the governorates [provinces] and distributing the gains of development justly.”

In November 2018, Razzaz, now prime minister, said to Parliament, referring to the tax hike amendment that brought down his predecessor four months previously: “If we fail to pass the amendment to the 2018 tax law, we would pay a higher price... because that would mean higher interest on the public debt. What we cannot collect in taxes will be reflected in interest payments.” 

Jordan gave him the benefit of the doubt because his argument was convincing, and because he made important promises in a press conference two days later: A 10 per cent rise in foreign direct investment, 5 per cent rise in exports, no new taxes in 2019, a promised 30,000 new job opportunities, 120 new schools, 80 per cent of Jordanians to have health insurance coverage, 70 per cent of children to be enrolled in kindergartens, public transportation buses to be connected to a tracking system to control their arrival and departure times and 35 per cent of energy would come from oil shale and renewable sources by the end of 2020.

Those among us who believed these promises may have been acting in the purest optimism. Then again, this November will be one year from when the prime minister made these promises; it will be reasonable to make a performance appraisal of the government.

Already, new taxes have been imposed on electronic cigarettes, 200 per cent, and electric cars, 25 per cent, despite the promise of no new taxes this year.

Moreover, it is clear that the government is unlikely to achieve the revenue level that it expected. Last Wednesday, the minister of finance told the Parliamentary Finance Committee that revenues from sales tax, customs and real estate tax dropped in the first third of 2019.

The minister blamed the JD90-million drop in revenue on the rise of e-commerce, smuggling tobacco, people quitting tobacco and the rise in the use of e-cigarettes. 

Seriously, this sounds like clutching at straws. If tobacco smuggling is large enough to affect national accounts, then obviously people have not stopped smoking or converted to e-cigarettes in numbers large enough to bring down the Treasury’s revenue. 

Moreover, putting aside tobacco smuggling, why have tax revenues from real estate transactions dropped? Is real estate also being smuggled into Jordan?

Then again, is it not more likely that revenues have dropped because the government has choked off business activity with over-taxation?

Could Jordan’s problem be not that the people are taxed too little but that the government spends too much?

Without wanting to sound alarmist, I would advise the prime minister this November to avoid making any bold year-end statements because people listen and they remember.

 

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