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Measures to unleash the economy

Mar 31,2024 - Last updated at Mar 31,2024

The rise in taxes of all types and names has exhausted the economy, as has the rise in fees and allowances.As for exemptions and exceptions, distinctions and distortions have occurred with some regards. Nothing is more dangerous to the structure of the economy than distortions.Therefore, the general tax on sales of basic goods must be reduced and unified, and it must be at a higher rate on luxury goods. Removing the special tax that targeted productive sectors with the aim of increasing tax revenues. They could no longer tolerate it, and their activity decreased significantly.This is in addition to the complete cessation of all exemptions and exceptions from various types of taxes. The so-called zero tax (at a zero rate) must be removed because its harm is greater than its benefit. It is also an area for fraud and unjustified distortions and differentiation may occur within one sector. These reductions are sufficient to stop (or at least limit) illegal practices such as evasion, smuggling and other practices.

It was proposed to approve progressive tax in studied proportions for the category of natural persons as well as for the category of legal persons. The tax rates for the two categories are determined with the utmost objectivity and accuracy in order to achieve the principle of income progressive. This is with the approval of a value commensurate with the costs of living as a personal exemption from the annual taxable income for a single person and a family.

This alone is not enough. Rather, services must be developed, the procedures for providing them simplified, and ensuring their transparency and fairness, while adopting clear procedures to control and correct spending and stop waste in various items and fields.

This transformation is based on reducing the cost of products, including goods and services, which increases their competitiveness in the markets, and thus the volume of activity increases, so tax collections automatically increase. I believe that such a transformation, which is based on enhancing the competitiveness and attractiveness of the economy, will bring about a qualitative shift and a tangible improvement in economic and financial indicators, especially after few years of implementation.

The greater the proportion of taxes and fees from the value of products and services, the higher the costs and prices of products and services. This leads to significant negative effects on the competitiveness and attractiveness of the business and investment sectors, thus killing the economy and, as a result, reducing revenues from taxes and fees. That is, contrary to goals and expectations. It is true that increasing taxes and fees may provide revenues to the public finances, but they are temporary and unsustainable. Revenues collected from a specific budget item may increase, but this is accompanied by a decrease in revenues collected from other items, especially related to economic activity. This is in addition to a decrease from the same item in the following year or years.

Increasing taxes and fees also eliminates the possibility of increasing public revenues generated from economic activity in the long term, in short, because such a measure kills the economy. This automatically leads to a decrease in public revenues instead of an increase. Therefore, these measures are nothing more than an attempt to solve today’s problems with distorted patchwork solutions at a high price at the expense of tomorrow, meaning they create greater distortions that need solutions in subsequent years.

No decision maker will succeed unless he takes the present and the future into consideration and balances them. Rather, it may require that he sacrifice a little of the present for the sake of the future and not the other way around. No decision maker will succeed if his thinking and endeavours are governed by seeking to provide abstract numbers in isolation from policies. That is, it is not achieved as a natural result of the process of adopting economic policies. Anyone who prioritises accounting over economics in his decisions will not succeed. Planning begins with shaping the future, establishing its vision, and then returning to taking solutions to the present, but within the framework and content of the future direction.

I do not know how investment is encouraged while at the same time imposing so many restrictions and obligations on it. How can facilitating measures be taken to attract and maintain investment while at the same time a large investment lawthat includes many articles from which many regulations and instructions emerged? All of this creates restrictions and complications and reduces the margin of flexibility in dealing with various situations and data. I believe that the investment law should not exceed four pages. This is an invitation to review the legislation of developed countries in this regard. A flaw in analysis leads to a wrong understanding of reality and a lack of correct knowledge of what is required. This leads to taking actions that include more obstacles and complications and thus going in the opposite direction or at least staying in the same place.

The wisdom is in creating a state of balance between public financial objectives and the objectives of the economy in the short and long term.When the imbalance in public finance indicators and budgets becomes widespread and becomes chronic, it is necessary to draw, carefully, a long-term plan that includes solutions that are fully adhered to and implemented within specific periods, and not for the matter to remain a matter of momentary efforts that lack a lot of depth in analysis.

If the way economic and financial policies are manageddoes not change, the work will be nothing more than a series of attempts to address the distortions unfortunately caused by previous treatments. Meaning treatments that create distortions and time is wasted trying to address them without achieving any significant progress or any positive results in this regard. So the situation gets worse. 

The question here is: Is there any benefit or necessity in allocating nearly a third of a billion Jordanian dinars to the economic modernisation plan? Is this consistent with the current financial situation of the state? What are the most prominent areas of spending these allocations specifically? What are its expected results and do it have specific indicators with pre-announced target levels? If taxes and fees were reduced by a quarter of this value, would the result be better?

The crucial question is, does the private sector need a stimulating business environment that enables it to achieve in light of intense competition, or does it need ready-made templates and recipes to work within? That is why I say the best solution is to unleash the business sector.

There is no doubt that we must realise the shift that has occurred in understanding the role of governments from the traditional service role to the developmental role that provides a supportive environment for business practices and regulates the work of the private sector, as it is what makes the real positive difference in the performance of the economy in terms of sustainable growth and the continued creation of productive job opportunities.

Finally, it is time for governments to put on the hat of the private sector and realise what it really needs to achieve growth and success.

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