Jordanian New Income Tax Law: Would You Still Invest?

Al-Anbat - This article answers two key questions regarding the new Jordanian Income Tax Law, which was proposed by Al-Mulqi's government, and then allegedly to have been reformed by Al-Razzaz's government. The first question is: will this law save our country from the hard financial situation that we are living? and How would this be achieved? The second question is: does this law -as claimed by Dr Omar Al-Razzaz- only have an impact on "wealthy people"? 

Before answering the above questions, it is obvious that the law has many shortcomings, and that it is not in our advantage. The mentioned law was suggested by the IMF as a compulsory provision so Jordan can get the financial aid.
Concerning the first question, in fact, this law would never be beneficial for our economic crisis. This is clear from many perspectives, as it fails to achieve the goals of any successful tax law either from the point of view of financial management sciences, public administration, or law.  

With regards to the first perspective; financial management sciences, the law in article 9 imposes a percentage of 26% income tax on telecommunications companies, pretending that this tax has nothing to do with the lower class of our society. Zain Jo, in its statement on the new income tax law, mentioned that: 
"if the law passed this formula and applied, it will add another burden to the burdens incurred by the telecommunications sector in terms of taxes and high fees, where these fees and taxes constitute more than 65% of every dinar spent by the consumer on telecommunications services". 
This example shows us who bears such taxes imposed by the law on the income of "giant" companies at the end of the day: it is the consumer who deals with these "giants".

Moreover, this law can be seen as an "anti-investment law". The same mentioned article eliminates all the exemptions of taxes granted for investment companies. Instead, it imposes a new ascending tax which will reach 20% from 2023 onwards. Taking into consideration that such exemptions from taxation in any investment law are deemed as Incentives and guarantees which aim to create a safe and attractive investment environment in any country in order to be capable of keeping up with the new world system, which is mainly controlled by the World Trade Organisation (WTO).

 From a financial perspective, any tax law is welcomed only if it achieves positive and high economic growth, improve tax collection, or at least improve tax collection while not hampering economic growth. Obviously, this law fails to achieve all of the above. This is clear because foreign investments in Jordan are very weak even though the current investment law states on the dispensation from taxation. Therefore, would any foreign investor think to invest in Jordan after the issuance of the new tax law?

Further, from the legal perspective, this new law constitutes a breach for article 23 of the Jordanian Constitution. Article 23(i) states that:
It is the right of every citizen to work, and the State shall provide opportunities for work to all citizens by directing the national economy and raising its performance level.
 
 This breach of the constitution is clear since the new income tax law would increase the tax burden on citizens and businesses in Jordan. It is well known that high tax rates decrease both the supply and the demand in any country, which negatively affects the employment rate. 

Finally, it is worth mentioning that IMF is the one who is responsible for the famines in Somali. In the 1970s Somali was a grain-sufficient country, now it became so dependent on food imports and food aid. According to the International Labour Organisation (ILO) mission report: 
'The Fund alone among Somalia's major recipients of debt service payments refuses to reschedule...De facto it is helping to finance an adjustment programme, one of whose major goals is to repay the IMF itself...'.
 Therefore, we need to be aware of IMF's intervention in our country, and to insist on our position of refusing such tax law. Jordan does not need this law in order to overcome its economic crisis, but the solution would be through encouraging and attracting international businesses to invest in our country. In addition to sincere anti-corruption policies and application which would lead to our prosperity.