Official Vagueness Toward Income Tax Draft Law Reflects on Media

AKEED, Husam Assal

Jordanians and media outlets have been busy with the leaking of a proposal to amend the Income Tax Law to Al Rai daily at the end of last month. The proposal speaks about "imposing tax on the income of a single person if it exceeds JD 6000 annually and a married person over JD 12000 annually." Commentators and journalists have written extensively on the details of the proposed amendment, especially in light of the contradiction in government statements about approving this proposal.

Mohammed Momani, minister of state for media affairs, told the Jordan News Agency (Petra), in reaction to information that is circulating about the amendments to the Income Tax Law, which are expected to reduce annual exemptions given to individuals and families, that the proposed amendment is "just one of many proposals that are currently being considered within competent circles at the Ministry of Finance." He added that the Cabinet has not discussed any proposal to amend the law.

Al Ghad daily has fueled the debate over the government"s intention to amend the law by publishing a report on Thursday, 7 September 2017, headlined "Government Pledges to IMF To Reduce Tax Exemptions." The report included a translation of a letter of intent signed by Minister of Finance Omar Malhas in his capacity as governor with the International Monetary Fund (IMF) and by Dr. Ziad Fariz, governor of the Central Bank of Jordan (CBJ). The letter includes a pledge to "reduce significantly the personal income tax minimum threshold to JD 6000 for individuals and JD 12000 for families, to bring them more in line with international standards."

On the same day, Momani told Jordan TV that "I am almost certain that the Cabinet plans will not affect the individuals and families that are exempt from taxes; namely, JD 12000 per individual and JD 24000 per family." Petra also carried Momani"s statements to Jordan TV, with the same content.

The Jordanian Media Credibility Monitor (AKEED) contacted Mohammed Momani, minister of state for media affairs, and asked him about the discrepancy between the letter of intent sent to the IMF and his recent statements. He merely said: "My statement clarifies the matter to a certain extent. It is enough."

AKEED confirmed that a letter of intent was sent by Malhas and Fariz to Christine Lagarde, managing director of the IMF, on 2 June 2017. The letter included an attachment titled "Memorandum of Economic and Financial Policies," which contained the following text: "In consultation with USAID, we are assessing options to broaden the income tax base and strengthen tax compliance, with a view to amending the income tax law by end-November, 2017. We expect the reform to yield a permanent revenue increase of 1 percent of GDP once fully implemented in 2018-19. The options for the personal income tax include reducing significantly the personal income tax minimum threshold to JD 6000 for individuals and JD 12000 for families, to bring them more in line with international standards."

This contradiction created confusion for the media concerning the seriousness of the government"s intention to submit a proposal to amend the law based on the proposal published in Al Rai, especially given the insistence of official statements that amendment proposals have not yet reached the Cabinet. This is despite the fact that the minister of finance and the CBJ governor had pledged to Lagarde that the amendment would be finalized in October based on the content of the letter sent in June.

Ahmad Safadi, chairman of the Financial Committee in the Lower House of Parliament, told AKEED that they had not received any proposal related to the law and that he had contacted the minister of finance, who explained to him that "so far, there is no specific proposal for amending the Income Tax Law."

Anas Qatatshah, media adviser to the minister of finance, told AKEED that he could not make a statement concerning amending the law because the Cabinet assigned Mohammed Momani, minister of state for foreign affairs, to exclusively speak about this subject.

Fayiq Hjazeen, a journalist specialized in economic issues, confirmed that the pledge by the minister of finance and the CBJ governor to reduce the minimum threshold of personal income tax for individuals "is not binding on the government because the amendment has to go through constitutional channels. The government has to approve the amendment and send it to the two chambers of parliament for endorsement."

Hjazeen added that "not fulfilling the pledge will not cause embarrassment with the IMF. This is because the IMF specifies general objectives that request that the government increase revenues by a variety of ways."

The media has shown interest in the subject in view of its sensitivity and impact on a large segment of citizens. The media initially carried the leak reported by Al Rai newspaper and published several articles criticizing the proposed amendment. One website published an article that monitored reactions on social media headlined "Public Indignation Over New Income Tax Draft Law." Another article carried the headline "Will Government Deliver Coup de Grace Against Middle Class in Jordan?" The article contained critical reactions by specialists. A third article reflected a state of concern on the part of economic experts over the proposed amendment. This is in addition to a report whose headline reflected largely the gist of conversations by Jordanians during the Eid al-Adha holiday: "Leaks About Amended Income Tax Law Steal Joy of Eid From Jordanians."

Media outlets reported that many MPs reject the proposed amendment. For example, Engineer Atef Tarawneh, speaker of the Lower House of Parliament, pledged to protect the middle class and oppose any proposal that affects it. MP Musleh Tarawneh suggested that there is a large group of MPs that is working to defeat the proposed amendment. Meanwhile, MP Ibtisam Nawafleh decided to oppose the new Income Tax Law once it is presented to parliament.

Al Rai daily tried to promote the amendments to the law by publishing an opinion piece on its first page headlined "Income Tax: Government Not To Pursue Any Scenario Without In-Depth National Dialogue." The article spoke about "political, economic, and social reform that primarily aims at achieving tax equity between the various segments of society and that protects low-income and middle segments." It said that the government had limited options and that the continuing reliance on aid and grants to finance the budget deficit or projects would not last long, given the trend of the decline in aid by donor nations.

Al Rai has maintained the same pattern of promoting the amendment to the law and described those who consider income tax to be government luxury or a matter of collection as "smart alecks." The paper enlisted the help of unnamed "experts" who urged Jordan to benefit from the experience of rich nations by "involving citizens in bearing a part of their responsibility toward their countries in return for continuing to provide educational and health services, building infrastructure, employing people, attracting investments, and creating a safe economic environment that achieves social security." This creates the impression that Jordanian citizens are actually not paying taxes.

The IMF will send a mission to the Kingdom next week, according to an announcement by the Ministry of Finance on Sunday, 10 September 2017. The Ministry said that "the visit is within the framework of the periodic review of the performance of the national economy and will continue for one week. It is also meant to examine financial and economic indicators as part of the stand-by arrangement signed with the IMF."

AKEED thinks that the media showed interest in the proposed amendment because it has a direct impact on a large segment of citizens and because many experts think that this would have a negative effect on the middle class. The media also suffered a state of confusion because the real attitude of the government toward the amendment is vague.