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Equality vs equity, in taxation

Sep 28,2017 - Last updated at Sep 29,2017

The average monthly salary in Jordan stands at JD451.63. There are only five Arab countries where average salary per month is lower than in Jordan.

Only 18.8 per cent of Jordanians make more than JD10,000 annually. Since income lower than JD12,000, individually, and JD24,000, for married couples, is tax exempt, it can easily be assumed that close to 80 per cent of Jordanians do not pay income tax.

Regarding the cost of living, according to some real estate owners, housing rent has gone up over the past few years, reaching, in East Amman, JD220 monthly.

If close to half the salary of an average citizen in East Amman goes towards rent, not counting other cost of living expenses, is it fair to tax their income?

Amman has been ranked as the most expensive Arab city and 29th internationally in the Worldwide Cost of Living Report 2017.

News about lowering the income tax exemption bracket a few weeks ago stirred up arguments.

If 80 per cent of Jordanians are not paying income tax and making an average of JD451.63 a month, is it fair to tax them?

One can see the case from both sides, but what if the lower-income citizens were taxed?

How can tax be levied on individuals capping JD6,000 for single payer or JD12,000 for married individuals?

Individuals making JD6,000 as single earners or JD12,000 as married couples cannot be clumped together under one taxable percentage because they have differing cost of living expenses.

The percentage, if income tax were to be levied, would need to be different for every extra JD1,000, and not lump summed; meaning, the tax could start at 2 per cent for JD6,000 single payer or JD12,000 for a married couple and increase one percentage point for every additional JD1,000 for single payer and every JD2,000 for a married couple. That way, if the income tax exemption is lowered, it could be better related to the cost of living and earning expenses of individuals.

That would increase the percentage of people paying income tax, help the country earn revenues and also give people the feeling that they contribute and share responsibility.

Still, if the tax base will be increased, citizens absolutely deserve an explanation of the reason.

How is an increased tax benefiting the average Jordanian? Will that cause an increase in the quantity of quality of public services or is it going towards decreasing the national debt?

If it is going towards decreasing the national debt only, there are many other solutions, like interest rate manipulation, government-issued bonds or spending cuts.

Jordanians are reasonable citizens willing to perform their duty to the country as ‎long as they are kept informed of strategic decision-making and are made part of it.

 

 

The writer, an MBA holder from the University of Texas at Arlington, works in social development. She contributed this article to The Jordan Times.

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