Tax debates

I read recently that in his State of the Union Address, today, President Barack Obama will attempt to convince the US Congress to increase taxes on the very rich (top 1 per cent of taxpayers) and the largest financial firms to provide tax cuts for the middle class and working families.

He also wants to make two-year community college education tuition free — possibly learning from Germany, which made university education completely tuition free.

The debate that will ensue in a Republican-controlled Congress — Republicans are usually opposed to raising taxes — is expected to be long and difficult, at least for the Obama administration.

The story in Jordan is completely different.

The government proposed a new Tax Law, surpassing in terms of hikes and commitment its stand-by arrangement with the IMF, which increases taxes on banks from 30 per cent to 35 per cent, on the commercial sector from 14 per cent to 20 per cent and on individuals by 34 per cent.

The tax jumps come in the midst of the longest economic slump in the history of Jordan.

After the Lower House of Parliament passed the draft Tax Law, the Upper House passed the law in no more than two days.
The new tax law, like most of Jordanian legislative changes, follows no permanent vision or a statement of policy, and does not have a theoretical or empirical underpinning. It is strictly based on the whim of the Cabinet in office.

With the new tax law there are no firm calculations of what will be gained or lost and the impact of the new taxes on the economy. So, on what basis did the Parliament pass the law?

According to a senator, the quick decision was made in order to ensure that Jordan appears to uphold its commitments.

Some parliamentarians claimed they were under pressure to serve the overall good of the country.

What good that is, they seem to be the only ones who know.

It is sad that the US Treasury does not lend some advice to Jordan or the IMF in this regard on how the process should have taken place.

After all, the US is Jordan’s largest donor and has significant pull with the IMF and World Bank.

Why does not such a modern, forward country like Jordan emulate its greatest ally and friend, the US, in its approach to changing legislation?

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