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A new Income Tax Law in trouble

Sep 24,2017 - Last updated at Sep 24,2017

The Ministry of Finance is busy, preparing the draft of a new tax law to make up for the revealed weaknesses of the present law, and as part of the economic reform programme agreed upon with the IMF.

Some ideas were leaked to the public to serve as a trial balloon. The purpose was to inform the people of the options that were under consideration and to avoid a shock.

Some political populists saw the opportunity and came up with a disorganised campaign refusing the possible amendments and warning against this so-called deadly mistake the government was about to commit.

They believe things are fine and there is no need to revise the Income Tax Law.

The present Income Tax Law exempts over 97 per cent of the population of this national tax. This is obviously not a reasonable state of affairs. The situation cannot be found in any country of the world.

The amendments are supposed to enlarge the base of taxpayers. Objections came in the name of the middle class.

There is widespread complaint about the acute budget deficit, yet the attempt to secure more domestic revenues to the Treasury is met with angry voices, which claim that taxes cause poverty.

Another dangerous problem that borders crisis is the rising public debt, which is approaching the mark of 100 per cent of the GDP. 

Such situation puts the country’s independence at risk and subjects the government to the dictates of foreign powers. Yet an attempt to take measures to reduce borrowing is met with objections.

Individuals’ share of income tax is less than 4 per cent of GDP, against 12 per cent in countries similar to Jordan in economic development.

Sometimes people forget that the tax rises according to the income bracket. It reaches only very high-income earners.

Even those would benefit from all the exemptions and low rates meant for limited-income groups.

They only point out the rate for the highest income earners, which applies to only a small part of income.

A taxpayer can say that the rate is as high as 20 per cent. Taxpayers would not admit that what is actually paid may be less than 7 per cent of the total income.

Tax may reach 25 per cent of the highest income group, but the overall average may not exceed 10 per cent.

The assumption is that all Jordanians would like to contribute to the wellbeing of their country.

 

They are against budget deficit and high debt, therefore, one wonders why some activists would reject all measures that try to put things right before it is too late.

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