Jordan’s punitive and convoluted tax system is harming its economic prospects.
By Laith Qassem
A recent study by To-Excel Consulting found the active number of taxpayers in Jordan declined from 292,744 in 2009 to 208,271 in 2012. The mix of taxpayers also changed significantly over this period. In 2009, 206,421 employees were active taxpayers. While in 2012, the number of employees paying tax plunged to 80,563.
|Total Active Tax Payers||292,744||278,625||244,004||208,271|
Over this period, the number of individual taxpayers rose from 68,297 to 87,735. Partners increased from 11,563 to 23,353, and companies increased from 6,463 to 16,620.
One might expect the net tax revenue collected by the government would have risen due to the higher number of corporations, partners and individuals paying taxes. However, published tax revenues as a percentage of GDP have declined. For a baseline, tax revenues in 2007 were 20.7 percent of GDP. While in 2009 this figure fell to 17 percent, and in 2012 it dropped to 15.3 percent.
It’s clear from these figures that companies are increasingly letting workers, their main asset, go. This means that companies are not retaining talent, capability or experience. This means that companies, if they are internationally competitive, are likely to lose it. It also means that companies are replacing fixed costs with variable costs as they’re now more likely to choose to pay workers by task, job, or daily rate instead of a fixed monthly salary.
Read the rest of this article in May’s issue of Venture magazine, available now on stands across the Kingdom.