Tax settlements and their economic impact

Reports indicate that tax settlements achieved nearly JD500 million by the end of the deadline set by the government. m

Some argue that leaving this money in the market might have been better for expanding businesses and increasing spending by companies and individuals. This would have been true if liquidity had actually flowed into the market, rather than accumulating in the accounts of taxpayers as unlawful profits, aside from the treasury’s rightful dues.

It cannot be said that combating tax evasion is unsuccessful, but it is achieving its goals through a balance of strictness and leniency. The strictness lies in inspection operations, while the leniency is evident in granting settlement deadlines upon the initiative of taxpayers themselves.

For instance, the differences in income tax dues from the medical sector alone amounted to approximately JD100 million.

Meanwhile, heads of professional unions still express discomfort with the invoicing system. They request that their clients pay them in cash, avoiding invoices, citing confusion and the potential for errors. However, these are exceptions, as the rule should be achieving transparency when doctors, lawyers, traders, and contractors pay their due taxes, just like employees, large companies, and banks. Often, arguments citing citizens' economic hardships have been used as justification to resist an income tax law that includes them.

Paying income tax is not harmful if it achieves fairness across all societal classes.

Like all societies, Jordan has three classes: the lower class, which includes the poor, estimated to account for around 15 per cent of the population, the upper class, comprising the wealthy, who do not exceed 10 per cent of the population and the middle class, which constitutes three-quarters of Jordanians, ranging from low-income earners at the lower end to high-income earners at the upper end.

The lower class does not have sufficient income to justify imposing taxes on them, and they are automatically exempted. The upper class also largely avoids paying individual income tax because their wealth comes from companies, banks, and institutions that pay taxes, distributing profits and interest to them tax-free. Additionally, capital gains they achieve are exempt to encourage investment.

In summary, the poor are not required to pay taxes, and the wealthy hardly pay because their income is derived from tax-exempt profits and interest.

The primary contributors to income tax revenues are large companies, banks, and the middle class. However, the wealthy individuals and high-income earners, such as doctors and some lawyers, are at the centre of disputes regarding self-disclosure of their income versus imposing mechanisms to determine their actual earnings. This is where the invoicing system comes in, a system that some professionals continue to strongly resist.