Tackling tax evasion vital in current economic conditions — experts

AMMAN — Addressing tax evasion efficiently has become of vital importance to the state budget and the overall economy in light of Jordan’s current economic conditions, experts agreed on Saturday.

Participants in a panel, organised by the Jordan Transparency Society, agreed on the need for stricter inspections and more awareness on the issue, noting that tax evasion decreases state revenues and compels it to resort to external loans with interest rates.

They noted that there are no exact figures on the extent of tax evasion due to the lack of studies that specificly define the size of the “shadow economy”.

Amman Chamber of Industry President Ziad Homsi said tax evasion causes deformities in the market, and prevents fair competition between committed and evading institutions, adding that committed small- and medium-sized enterprises are most negatively affected.

He noted that one-third of local industrial institutions export products and are therefore exempted from taxes. 

However, he pointed the fluctuations in investment regulations, particularly those regarding taxes, as a discouraging environment for businesses.

For his part, Director of the Income and Sales Tax Department Bashar Saber said the total tax loss in 2016 have exceeded JD3 billion. 

The official attributed tax evasion to the lack of awareness on the link between paying taxes and the performance of the state budget, citing legislative impediments, such as the government’s inability to access bank accounts of tax payers, as another challenge.

In addition, he said the penalty for tax evasion, which is between four months and one year imprisonment, is not enough, and yet, is not enforced.

Analyst and columnist at Al Rai Arabic daily Issam Qadamani disagreed with Saber, citing tax payers’ lack of trust in the government as the main driving force behind tax evasion, adding that tax payers do not see reflections of tax-paying on the quality of services.

Meanwhile, he said economic reform could be more achievable if income tax regulations were amended, not sales tax, pointing to a “huge” gap between income tax annual revenues (some JD800 million) and sales tax (some JD3 billion).

He added that decreasing taxes and enhancing public spending on investments was proven internationally to be the best way to boost the economy’s performance, urging the government to reduce taxes to encourage economic activity. 

Lawyer Abdullah Nawayseh attributed tax evasions to the “high and increasing” tax rates, as sales tax have increased over the years from 7 to 10 to 16 per cent and income tax has reached 35 per cent for banks and 25 per cent for other companies. Furthermore, the internal and external double taxation is another impediment.

He noted that tax evaders provide faulty financial records, hide them or intentionally destroy them.

He cited a 2011 World Bank study saying that Jordan’s informal economy, which is not entitled to taxes, fees or registration is between 20-25 per cent of the country’s gross domestic product.

Another study he mentioned claimed that in 2010 tax evasion was between JD525 million to JD575 million.

On the sidelines of the panel, Mohammad Hudeib, the new head of the Jordan Transparency Society, honoured its former head Mamdouh Abbadi.