The economic crisis in Jordan erupts

Protests have been ongoing in many parts of Jordan for days and there are renewed calls for another strike this week following the limited one that was organised by the professional associations last week.

The protests are prompted by the draft income tax law, an amended version of the existing one that the government recently referred to the Parliament for approval. The new draft has widely been seen as an additional government measure targeting an already overburdened Jordanian society with high taxes and high prices for resolving the country’s grave economic crisis.

The economic crisis is no doubt real. It has been steadily worsening due mainly to regional considerations: The influx of refugees into Jordan from Syria and other crisis-stricken countries, the rising cost of energy of which Jordan needs to import every drop at rocketing market prices, the closure of Jordan’s borders with Syria and Iraq and its crippling effect on trade and industry and the security requirement costs of policing an extensive, almost 800-kilometer-long border with Syria and Iraq against terrorist incursions and infiltrations.

Such complications have been compounded by an almost total severance of aid from friendly countries that used to help Jordan shoulder a security burden on behalf of, and for the benefit of, the region as a whole. International aid provided for refugees hosted by Jordan has hardly been adequate to cover even a small portion of the cost.

A consequence of the harsh reality of the economic crisis was the inevitable involvement of the International Monetary Fund, which has often been brought into disrepute due to its unpopular prescriptions for austerity, for overseeing an economic reform programme and the government was forced to comply with some unpopular measures of which the controversial tax law is one.

In this sense, the government did not have much choice, neither with respect to the current tax amendment, nor regarding a long list of previous highly unpopular measures of cancelling tax exemptions, raising sales tax on almost every commodity and service, raising fees across the board, removing bread subsidy and regularly raising oil derivatives prices on monthly basis.

By the same token, the Jordanian people did not have much choice either but to run out of patience after enduring, with remarkable understanding and unique responsible restraint, endless loads of burdensome and often unfair austerity measures viewed by the majority as exclusively targeting their pockets for addressing the chronic budget deficit.

Additionally, and to make matters worse, none of the harsh measures, ongoing for years, have yielded any tangible results. Neither did they succeed in reducing, or even stabilising the rising national debt, nor did they lead to a healthier economic environment. On top of all that, government services in the fields of public transport, health, education as well as other administrative matters, expected to improve in return for citizen funding of its apparatus, have in fact deteriorated. To be fair, every time the government came up with a solution, new challenges emerged, often outweighing remedial measures.

As such, the draft tax law has emerged as the straw that broke the camel’s back.

Further problems arise from the bad timing of the law, the fact that it is strewn with imperfections and that it was not adequately explained. The authors failed to adequately coordinate with the concerned sectors in a timely manner prior to sending the law to Parliament. The authors failed in anticipating the popular mood and the accumulating frustrations resulting from a mounting and endless spiral of price and tax rises. They also failed in showing due consideration for the good Jordanian people who voiced their pain, insisting instead on pushing the legislation through regardless. Yes, the government offered to start a dialogue with all affected parties, but that offer came too late. It should have started before the final formulation.

What poured fuel on fire at the wrong moment was the very ill-advised, unwise and provocative government decision last Saturday to raise fuel and electricity prices at the peak of the crisis. This infuriated the protestors even further to the point that His Majesty King Abdullah had to instantly, and for the second time, intervene to order the cancellation of these measures. Prior to this, the first time the King’s intervention was required was a few months ago after the government included medicine, again unnecessarily, in a list of commodities on which sales tax was to be imposed. As usual, the King, seen by the people as the nation's saviour, took the side of his people in ordering the medicine tax to be cancelled, hence defusing a previous crisis.

The controversial tax law may suffer some imperfections. It targets the middle class and it may end up raising the cost of living generally and consequently further affecting the poor, on top of their compounded hardships. But tax reform is absolutely required for addressing major loopholes in the current law. Tax fraud and tax evasion are major problems that cost the economy hundreds of millions of dinars annually. This requires specific legislation to eliminate.

Some of the protests are no doubt legitimate and should be listened to and adequately addressed. But the law should ensure even and comprehensive tax collection, leaving no room for evasion or fraud.

Most likely, the draft income tax law will be radically amended in a manner that takes into consideration all legitimate objections. Indications in both the Parliament and the Senate are clear that both chambers will not pass the law as is. King Abdullah has called for national dialogue towards a reasonable consensus that guarantees the interests and rights of Jordanians as well as the integrity of the state.

However, and just before submitting this article to The Jordan Times, a major development had occurred. His Majesty King Abdullah accepted the resignation of Hani Mulki’s government, apparently reaching the inevitable conclusion that this is the only way to defuse the escalating crisis and to assure all Jordanians that their concerns are always at the top of His Majesty’s priorities.