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A new income tax law

Mar 04,2018 - Last updated at Mar 04,2018

On average, new income tax laws in Jordan are issued once every three years. Stability regarding this sensitive domain does not exist. Therefore, the battle between the government, the Parliament and business circles continues. Each party is after its own interest, such as increasing Treasury revenue, gaining popularity or ensuring lower cost.

The present income tax law was cooked in a speedy manner, so much so that the Senate was given only one day, which was the last day of the year. If the Senate fails to approve it for any reason, its application will be postponed for the whole year.

The Senate was not impressed by the way the law was drafted, but it had no choice but to approve it to avoid being held responsible for preventing the draft law from issuance. The Senate, grudgingly, approved the text but expressed reservations and asked the government to come again, as soon as possible, with certain amendments. However, it did not oblige.

This time, the government will submit its draft law early. We have ten months for the process, whether in the same language of the Ministry of Finance or in another version.

As expected, the arguments over the new draft law will be very strong and motivated by either direct interest, or to simply prove that rejectionist groups exist and must be listened to, or event to prove "themselves" as strong defenders of public welfare by lowering tax burden, especially when the draft law came at a time when many tough decisions were taken, such as increasing taxes, removal of exemptions and raising prices.

Timing element is of significance because the law will be issued and published in the Official Gazette before the end of 2018. It will be applicable to income earned in 2019 and will be accounted for in 2020, when circumstances will be different.

The problem is not of a legal nature, it is meant to satisfy the Treasury’s needs for more funds to reduce deficit and limit the need to borrow. Yet, very little will be used in the arguments on words like deficit and debt, and much will be on heavy taxes on middle-class citizens, even though some 95 per cent of individuals are not subject to tax. What is actually paid by individuals is less than half of one percentage point of the GDP, which is one of the lowest rations globally. Actually, the major part of proceeds comes from banks and major companies.

The Ministry of Finance decided to open the expected heated arguments very early this year, when the draft is issued or received by the Parliament and its content is made public.

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