Jordan Faces Tax Crisis
Jordanian Prime Minister Omar Razzaz is pushing his new tax bill through parliament, despite waves of disapproval from the Jordanian people. In an ironic twist, Razzaz has decided to pursue the same route as his predecessor, Hani Al-Mulki, who was forced to resign just three months ago because of protests across the country based on a similar tax plan. The income tax plan, created in conjunction with the International Monetary Fund (IMF), was created in order to combat Jordan’s increasing budget deficit and tax evasion practices. It has angered many Jordanians who believe that the bill will hurt the low and middle-class citizens.
With 20% of its people living on the verge of poverty, a $40 billion national debt and an unemployment rate nearing 19%, the Jordanian economy clearly needs assistance. A deal signed with the IMF in 2016 that guaranteed $723 million to the Jordanian economy has helped but has also led many to believe that the country is now being led by the IMF. Jordanian citizens cite government corruption as a primary reason why the economy is struggling, and not without justification. Jordan’s ranking in the ‘Corruption Perception Index,’ deteriorated by eleven places from 2016 to 2017. They now rank as the 59th least corrupt country in the world.
The bill, which has a goal of generating $395 million, has also been scrutinized from a business perspective with the argument being made that raised taxes on special development zones and free zones will discourage businesses from investing in Jordan. Furthermore, critics claim that since the bill exempts pensioners, who already receive $4900 per month, and raises the income tax to 5-10% for lower-income Jordanians that make $1000 per month, it will cause significant damage to the lower class. In a remarkable twist, Prince Hamzah Bin Al-Hussein of Jordan has also come out in opposition of the tax bill, tweeting that the government should be, “Correcting the public sector’s failed management approach and taking serious action to combat rampant corruption.” Public disagreement with the government from a member of the royal family will further raise pressure on the Razzaz administration.
This is one of the most politically charged issues in recent Jordanian times. It is, of course, the same exact matter which led to his predecessor’s resignation, so to attempt such a risky maneuver in his opening months of office is ill-advised. Razzaz’s poll numbers have already taken a hit, with the percentage of Jordanians who believe that he represents an improvement on Al-Mulki dropping from 81% in June to 54% in September.
With public approval of Razzaz dropping rapidly due to his tax policy, the prime minister will have to weather the storm or ultimately decide to abandon his policy. Recent history suggests that he would be wise to listen to the Jordanian people and raise funds by tackling governmental greed, rather than taxing those who need money the most.