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Income tax bill: Between lack of transparency and populism

May 30,2018 - Last updated at May 30,2018

As he met heads of professional associations, who were planning a nationwide strike protesting the proposed income tax law, Prime Minister Hani Mulki told the critics that amending the existing law, as part of an adjustment programme coordinated with the International Monetary Fund (IMF), is not dictated on Jordan.

Maybe the word "dictated" or "imposed" does not aptly describe reality. However, the authorities willingly accepted the conditions set by the IMF for a $700 million, 36-month Extended Fund Facility (EFF) programme. That came in documents signed in 2016 and posted on the fund's website, in which the government pledged to reduce the "exceptionally high" personal income tax exemption threshold and raise the general corporate income tax rates, among other measures that antagonised almost every economic sector. The law is overdue as it was supposed to become effective in 2018.

According to the government's press release, the furthest the premier went in explaining the consequences of failure to enact the law was that the EFF was important to secure external grants and credit at low interest rates "if needed".

What Mulki, or the press statement, did not say is what options would be left for Jordan to win the approval of the IMF if the bill fails to pass at the Parliament. 

The government knows and the unionists who lead the strike must know. In the case of Egypt and other countries stuck in an IMF-sponsored programme, they had to float the currency. Nothing of the sort is mentioned in the literature related to Jordan's EFF, but it remains a tool that the fund has used in other places. This has been a red line for Jordan over the past decades, and officials have managed to dodge it due to the perils surrounding such a move and its impact on national security and stability. Under the new tax law, 90 per cent of the population will not pay income tax, down from 95 per cent, but if the credit rating falls, or, God forbid, the dinar is affected, everyone will pay a heavy price, much graver than that of additional taxes.

The public does not seem to understand the dangers to national economy if Jordan fails to meet the terms set in the EFF agreement, yet, people reject the law altogether, and critics, including some opinion leaders, have ridden the wave of public discontent and flexed muscle in the face of an exhausted government that is not saying everything. 

With all the energy left, the government will fight to get the law enacted, while the Lower House is ready to fight back, as its speaker said on Tuesday in a tone that smells of populism. The best scenario is a compromise that is accepted by the IMF and one that allows Jordan to leave behind a formidable challenge and move forward to self-reliance as it has promised.


The writer is deputy chief editor of The Jordan Times

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