Drop in oil prices blamed for lower sales tax revenues

AMMAN — Analysts on Thursday attributed the decline in sales tax revenues the government collected during the first 11 months of last year to the drop in international oil prices. 

Finance Ministry figures show that sales tax revenues dropped by JD36 million until the end of November of last year to JD2.539 billion from JD2.575 billion in the same period of 2014. 

Economist Mufleh Akel said the drop in sales tax revenues was mainly caused by the drop in international oil prices, which reflected on fuel prices in the domestic market.

In November 2012, the government ended subsidies on fuel products and has since then updated local prices on a monthly basis to reflect oil costs on the global market. 

“The drop in oil prices internationally is bad news for the government because the Treasury loses tens of millions of dinars,” Akel told The Jordan Times over the phone, adding that a tax rate of nearly 40 per cent is levied on fuel products. 

Analyst and columnist at Al Rai daily Issam Qadamani agreed with Akel, adding that slow economic activity is also to blame for the decline in revenues. 

He noted that demand for goods and services was weaker last year, compared with 2014. 

Qadamani indicated that in 2015, the government lowered sales tax rates on clothes and accessories to boost demand, but said that consumers seemed to spend less on such items as they prioritised essential commodities. 

In 2014, he said, oil prices hovered around $100 a barrel, while 2015 saw unprecedented sharp declines. 

“The higher oil prices are, the more revenues the government makes out of fuel products,” the analyst said. 

Overall domestic revenues, tax and non-tax, dropped by JD13.5 million in the first 11 months of last year to around JD5.286 billion from JD5.299 billion recorded in the same period of 2014, according to official figures.