No new taxes in Jordan’s 2020 budget, says finance minister

Jordan will not impose new taxes in its proposed 2020 budget but will seek other means, including a crackdown on pervasive tax evasion, to help boost national revenues crucial to lowering record public debt, the country’s finance minister has said.

Mohammad Al Ississ told the parliament’s finance committee that maintaining “fiscal stability” remained a major concern. The budget is expected to be sent to parliament in the coming days.

Jordan is struggling under a three-year International Monetary Fund (IMF) programme – which began in 2016 – to rein in public debt that has hit a record 94 percent of gross domestic product as part of a long-delayed programme of economic reforms.

The government is looking for ways to increase revenues without resorting to new taxes that could lead to the same anger that triggered demonstrations in 2018 – that turned into some of the biggest in years – when steep tax hikes pushed by the IMF came into effect.

“We have to reach the necessary revenues to continue fiscal stability,” Al Ississ said.

The government has pledged cuts in public expenditure but is mindful of mass protests in neighbouring countries, including Lebanon and Iraq, in the past month over eroding living standards and corruption.

Parliamentarians said they would reject any proposals to raise water or electricity fees as officials say they plan to adjust the tariff structure. Members of parliament also want the government to reduce sales taxes on essential food items to help low-income Jordanians struggling with rising poverty.

Al Ississ said tackling tax evasion, which officials estimate costs the treasury hundreds of millions of dollars annually, would help improve government finances.

“We will fight tax and customs evasion with all the power of the law,” Al Ississ said.

Al Ississ said last week the government had little leeway in the coming budget, which last year stood at $13bn. Jordan has some of the world’s highest government spending relative to the size of its economy.

The spectre of bigger spending surfaced when the government was forced last October to reach a pay deal with the teachers union in a bid to end a one-month nationwide strike.

The Cabinet also raised pensions for military retirees in a move economists described as caving in to populist demands at the expense of fiscal prudence.

These policies have ravaged Jordan’s finances and alarmed an IMF mission holding consultations in Amman on progress with the reform programme, officials and diplomats said.

Jordan was expected to ask the IMF for more time and either extend the existing programme or put in place a new programme altogether, diplomats said. Officials said they would resist any IMF effort to push Jordan to adopt more austerity measures that risked increasing instability and civil unrest.