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The new income tax law: What's for us in return?

May 09,2018 - Last updated at May 09,2018

The amended tax law drafted by the government is likely to pass the legislative process towards enactment. Despite expected opposition by lawmakers, this is serious business and a must-do, overdue move as far as the government is concerned, and so it will make every effort to get the job done and fight fiercely during the "battle" with the House.  

Regardless of the pros and cons of the proposed law, expanding the base of taxpayers is an unavoidable obligation, simply because this government has committed itself to that in the documents signed with the International Monetary Fund (IMF) for a $700 million Extended Fund Facility (EFF) programme. 

"To underpin their fiscal consolidation efforts under the programme, the authorities intend to rely primarily on simplifying and streamlining tax exemptions and broadening the income tax base," says one of these documents, dated September 2016. 

Failing to meet these obligations has consequences that are graver than all the risks that might be associated with the tax-related measures planned by the government, including, for example, a drop in credit rating, which would make borrowing more costly and deepen the economic crisis beyond repair. 

Authorities have not said that transparently, and, instead, focussed in the campaign leading to the endorsement of the mandating reasons of the amended law on the need to curb tax evasion. Half truths again: Officials have previously estimated that the public funds lost through the illegal practice between JD700 million to JD1 billion a year. Then at this week's press conference following the Cabinet meeting, the government said that all the corrective measures, including the expansion of the taxpayers' base from 90-95.5 per cent would generate JD250-300 million annually. 

The intended tax reforms follow a 2017 wave of "corrective measures" that saw subsidies lifted and sales tax raised for previously exempted products, either fully or partially, to enhance domestic revenues. The more vulnerable segment of households was compensated with a total of JD171 million to offset the impact of bread prices hike.

But the big question is whether, after all these measures that have had a heavy toll on Jordanians' standards of living, the government would achieve the envisioned results. It is absolutely legitimate for people to ask if they would get better services and quality of life in return for all these sacrifices. After all, that is what the social contract is all about. 

But in the least, they need answers to the following questions: Will we have a zero budget deficit in 2020? Will we achieve a 5 per cent growth in 2022 at the conclusion of the Economic Growth Plan "regardless of the turbulent situation in the region" as the plan says?  Will we be able to reduce the public debt ratio to GDP to 77 per cent from the current 95 per cent? 

The incumbent government is not likely to be around then to hold it accountable for any failure to make good on promises it has made to an overburdened public. However, the people will be there and the future will be there, and both will be the victims of the very people we have entrusted to solve our problems and lead the way to a brighter tomorrow.


The writer is the deputy chief editor of The Jordan Times

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