Industrialists question export incentive by-law

AMMAN — The government announced a by-law that offers incentives to manufacturers, paying them 3 per cent of their total exports for 2019, increasing each year thereafter, but industrialists said that the conditions to receive the incentives are “very difficult” to meet.

The by-law was announced to compensate for the cancellation of the export revenue exemption, which remained in effect until the end of 2018, when no income tax was levied on exports, President of Jordan Exporters Association (JEA) Omar Abu Wishah told The Jordan Times over the phone on Tuesday.

“The government, therefore, decided to support exporters by providing them with 3 per cent of the total value of their exports, which was a first-of-its-kind step for the Jordanian government after the exemption on income tax stopped,” Abu Wishah said.

He noted that many countries have already implemented similar measures and provided subsidies to their exporters.

The requirements of the Trade Ministry, alongside those of the Jordan Customs Department and the Income and Sales Tax Department, are all listed, “they are not easy, but they are achievable”, he said.

“The most important requirement for exporters to meet is to prove that their product is Jordanian, and ensure that the added value of the product is higher than 30 per cent, including materials bought locally, contribution to local businesses, and other costs,” Abu Wishah said.

He also pointed out that if the value is less than 30 per cent, the exporter would not be eligible for the incentive.

The contribution includes the salaries paid to workers in the Kingdom, rentals of facilities for production and costs of materials from the local market, all resemble forms of contribution to the local market and represent a local added-value, said Abu Wishah.

“There are surely big companies that are able to, albeit not easily, achieve the government’s requirements and those of the customs and tax departments, but everything has to be top-notch,” Abu Wishah said, noting that this includes settling any dues to the customs and tax departments.

The association president suggested holding awareness campaigns via online platforms to help companies that are unable to meet the requirements learn how to overcome the hurdles facing them. 

He described supporting local exporters as a “win-win situation”, as it will help them pay their employees and keep their jobs, and probably allow them to expand their industries and hire even more workers, and they will earn hard currency when exporting, which benefits both the manufacturer and the country.

The JEA president said: “It is vital that this programme works, and since it started in 2019, the government should announce the exporters who earned subsidies and record the value they will be paid before the end of this year.”

Abu Wishah also highlighted the impact of the coronavirus crisis locally and globally, which increases the importance of supporting companies and help them even more.

“The requirements should have been simpler than they are, and when the government decides to support exporters, it should not complicate the process, especially since it is compensation for the cancellation of exempting revenues from income tax,” said Jordan Chamber of Industry board member and representative of the food industry sector Mohammad Walid Jitan

Jitan said all countries export to each other, and if manufacturers are not supported, they will lack having a competitive edge in foreign markets.

“Our revenues were exempted at the beginning, with no income tax, but after the Tax Law was amended, an understanding was reached with the government to issue the requirements, which should have been simple, beginning with 3 per cent in 2019, increasing to 5 per cent in 2020 and so on,” Jitan said.

The number of companies that applied to the ministry to benefit from the subsidies do not exceed 10 to 15 companies out of the 2,000 companies that export, Jitan said, noting that “this indicates issues in the requirements”.

Any officially registered industrial company, which submits its tax and export statements should be acknowledged based on the value of their exports and be paid the 3 per cent of the overall value, the representative said, noting that the requirements should not demand that customs and tax departments’ dues be settled, which should be a separate issue.

Jitan said that another hurdle is demanding financial statements and how exported products are paid for, noting that with many countries, dealings and transactions do not involve banking, only merchants dealing with each other, such as in Yemen, Saudi Arabia, Iraq and Libya.

“As a chamber of industry, we asked them to change the requirements by collaborating together, but until now nothing has happened,” Jitan said, pointing out that the requirements “were difficult” even before the outbreak of the COVID-19 crisis.