What’s with taxes?

As Jordan launched yet another attempt at fixing its tax system through the recently passed piece of tax law, one comes to question the reason for so many changes of tax legislation.

Social scientists and common sense dictate that taxes and laws and regulations pertaining to them should be stable.

Why are they not in Jordan?

In 2009, the government managed to amend the tax law and issue a new piece of legislation. Every year after that a new draft tax law emerged and had it not been for the frequent change of guard, the new tax law would have probably emerged in one form or another several years ago.

Did the government not know what it was doing in 2009?

It seemed to know what it wanted. Its belief then was that to get more revenues from taxes one must lower tax rates. So tax rates were lowered.

Several failed revisions emerged and even though the government was mobilising through donors some highly qualified foreign expertise, the outcome was not really up to par.

The new law is underpinned by higher tax rates, discrimination among sectors and almost a draconic treatment of tax evaders.

In other words, the government (this Cabinet) reversed the trend of its predecessor. So somebody was, is or will be wrong in all this.

But who and how can we tell?

Obviously there is no guiding economic policy in Jordan to commence a value-based debate.

Governments act based on their thinking and training, and mistakes pile up, which is probably why we have more than 120 types of taxes and fees — imagine that: 122 type of taxes and fees paid by Jordanians.

Furthermore, a good portion of taxes and fees are in contradiction with Article 111 of the Constitution.

Not only is there no policy, but the recommendations that targeted fixing the tax administration seem to have remained outside the concern of this administration, as was the case with many others
before.

There is no significant reform to the collection of taxes, and over 40 per cent of tax filings are audited, which poses a tremendous pressure on the auditors, makes them way too many and enables grounds for corruption.

The very reason why people evade taxes has not been addressed. The answer may lie outside the tax realm itself. It may be that people perceive that the benefits they would obtain from government such as subsidies for small- and medium-sized enterprises are not there and that banks would not lend them if they were to formalise since our banks prefer to lend to large firms, which are already formally governed. Consequently, more and more firms are leaving the formal sector.

Taxes are a burden; for citizens to willingly pay them, they have to believe that they are being fairly treated and that they would benefit from the payment of such taxes.

Right now, the perception is that taxes are only paid for security reasons; all other services are to be paid for through fees. 

Citizens pay as they work, move, consume. It is as if one were penalised for working, which I am sure is not what our government wants.

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