Jordan’s lower house of parliament approved a new IMF-backed tax law on Sunday after Prime Minister Omar Razzaz warned that the country would pay a heavy price if the bill was not passed.
The parliament introduced some changes in a move to help the economy move ahead as Jordan seeks to lower its huge debts through a combination of austerity measures and an IMF bail-out.
Prior to the vote, the Prime Minister warned deputies Jordan would pay a heavy price if parliament failed to approve the legislation, meaning the country would have to pay even higher interest rates on its substantial foreign debt.
He said the law promotes social justice by targeting the wealthy and combats long-time corporate tax evaders, but opposition deputies argue it will hurt the already stagnant economy and diminish middle-class incomes.
"The individuals who will be affected are the top 12 percent income earners, it won't affect middle and low-income earners," Razzaz responded.
The parliament approved the amendments to the income threshold raising it from an annual JD18,000 as in the government's version of the law to JD20,000 for families and from JD9,000 to JD10,000 for individuals.
Under the existing law, the figure is JD24,000 for households with JD4,000 in exemptions on VAT medical and educational receipts and invoices and JD12,000 for individuals.
Members of the parliament also approved raising the VAT exemption to reach JD2,000 instead of JD1,000 in the government’s proposed bill for families, and to JD1,000 for individuals, provided that such expenses are covered by bills for health, education, loan interests or an Islamic finance and investment instrument.
Income tax on banks will remain at 35 percent as in the original law and not 37 percent as proposed by the government.
The income tax for the industrial sector was set at 14 percent; 35 percent for the banking sector and 24 percent for telecom, electricity, mining, insurance, reinsurance and financial brokerage firms as well as legal persons practicing lease business.
In addition, the parliament determined that those whose income annual income exceeds JD1 million are subject to a 35-percent income tax.
Speaking to German News Agency (DPA), Minister of Finance Ezzedin Kanakriyeh said that the amendments will reduce the expected proceeds of the law to JD100 million instead of JD290 million. He pointed out that these amendments will affect the law in general.
The bill needs to be approved by the upper house of the Senate to enter into effect and then a royal decree will be issued before it is published in the Official Gazette.
The bill sparked controversy in Jordan last June after the government resigned following protests in the country before Omar al-Razzaz was appointed as prime minister and the law was withdrawn from Parliament for amendments.