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Jordan Approves New IMF-Guided Tax Law

Jordan Approves New IMF-Guided Tax LawJordan Approves New IMF-Guided Tax Law

Jordan’s cabinet on Monday approved major IMF-guided proposals that aim to double the income tax base, as a key part of reforms to boost the finances of a debt-burdened economy hit by regional conflict.

“When only 4% of Jordanians pay (personal) income tax, this may not be the right thing,” Finance Minister Omar Malhas said in remarks after the cabinet meeting, adding the goal was to push that to 8%. The draft legislation was submitted to parliament, Reuters reported.

The IMF’s three-year Extended Fund Facility program aims to generate more state revenue to gradually bring down public debt to 77% of GDP in 2021, from a record 95%.

A few months ago Jordan raised levies on hundreds of food and consumer items by unifying general sales tax to 16%—removing exemptions on many basic goods. In January subsidies on bread were ended, doubling some prices in a country with rising unemployment and poverty among its eight million people.

The income tax move and the GST reforms will bring an estimated 840 million dinars ($1.2 billion) in extra annual tax revenue that will help reduce chronic budget shortfalls normally covered by foreign aid, officials say.

Corporate income tax on banks, financial institutions and insurance companies will be pushed to 40% from 30%. Taxes on Jordan’s phosphate and potash mining industry will be raised to 30% from 24%.

The government argues the reforms will reduce social disparities by progressively taxing high earners while leaving low-paid public sector employees largely untouched.

“This is a fair tax law not an unfair one,” said Malhas, who shrugged off criticism the law is lenient on many businesses connected to politicians whose transactions are not subject to tax scrutiny.

 

 

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