The New Income Tax Law

By Jumana Ghunaimat

تم نشره في Sat 8 April / Apr 2017. 12:00 AM
  • Jumana Ghunaimat

It seems Jordan is destined to remain suspended in this state of legislative limbo and instability, particularly in regards to investment laws, regulations, and environment.

The income tax law. Apparently, the government still thinks it is overly generous of exemptions.

Now under massive pressures to increase revenues, the Ministry of Finance is working tirelessly to amend taxation laws in accordance to the requirements of the International Monetary Fund (IMF).

Soon, the bill of tax amendments will be finalised and passed over to Cabinet for ratification and then put to a vote under the Dome.

This is isn’t the first, nor will it be the last time the government tries to pass such an amendments to meet the requirements of international organisations like the IMF. This is the second in three years.

Back in 2014, under Dr Abdullah Nsoor, an all-new taxation law bill was proposed and revoked.

However, MPs did end up passing parts of it later on, via amendments to the standing tax law then, which did not appeal much to the government or the Fund.

The outcome legislation forms the standing tax law and regulation we’re struggling with today.

Imagine what would have happened had Nsoor’s bill been passed as is?!

Either way, this second amendment comes now, after two years of commitment to the criteria of the IMF’s credit facilitation programme (2012-2015).

Right now, the government is cooking up a bundle of amendments to suit the Fund’s liking, more or less, as required for the initiation of the pending programme.

Notably, the Ministry has to have these amendments ready and passed by Cabinet before April 21st. That is before the IMF’s next review of the Financial Reformation Programme and the annual convention of the Fund.

Otherwise, the finalised review of Jordan’s economic performance will not be ratified by the IMF.

Times over, the government has reiterated their view on incurring further costs on fixed-income segments of our society. Their rational is that 95 per cent of that particular segment is exempted of income taxation.

While it may be partially true, this does not mean that they actually carry more financial weight.

On the other note, it sounds more like the government is hunting them down, simply because it’s easy to collect from them, since their incomes are fully disclosed and clear.

Meanwhile, others with much higher incomes evade taxation like it’s nobody’s business.

The government’s tax inspection and collection instruments are incapable of containing and addressing tax evasion. Doctors and lawyers, among other professionals, still make loads of untaxed money.

Primarily, these amendments aim to expand the taxable segment of society, particularly employees, by shrinking the annual income ceiling for tax exemption per household from JOD24 thousand to JOD18 thousand.

Other news say the ceiling has been dropped as low as JOD16 thousand, to give MPs a margin to bargain a higher taxable annual income ceiling per household, to save face in front of their constituents.

Under the IMF’s reforms programme, the government is required to allocate around JOD550 million by 2018, which is as harshly applicable as it is hard. Particularly given the inability to achieve required growth rates and job opportunities to absorb at least a percentage of the unemployed.

Meeting the Fund’s criteria requires a bundle of difficult decision. Prime of which are the undergoing constitutional amendments to passing the new Bill on Taxation, effective by end of 2017.

Calculations, so far, show Treasury income from individuals stands at JOD224 annually from income taxes.

Seemingly, the government seems to be either forgetful or dismissive of the fact that public revenue lost to tax evasion stands at triple that amount, at least.

That said, it is simply because the government is in fact unable to combat tax evasion effectively that they have turned to sucking the middle class and fixed-income segments of our society dry.

More than ever, a holistic and thorough approach to the imbalances and deformities of our taxation system is needed now. Partial solutions in this regard will only make it worse.

This article is an edited translation of the Arabic version, published by AlGhad.