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The ugly truth about the economy

Sep 18,2017 - Last updated at Sep 18,2017

Two main messages were sent by His Majesty King Abdullah in the interview he gave Jordan News Agency, Petra, last week.

The first was his demand from the Jordanian people to show greater appreciation for the serious economic challenges Jordan is encountering, such as interruption of trade and exchange with war-stricken neighbours, the influx of refugees and the shortage of aid to prop the Jordanian economy.

The second was to inform the people that from now on, Jordan must chart its way and dedicate its efforts to reach self-reliance and economic sufficiency.

While doing so, the King cautioned those opposing government policies to abstain from injurious statements to individuals. No matter who the perpetrator is, the King asserted, he or she will be subject to law.

These Royal pronouncements came in the wake of across-the-nation protestations against the government’s intention to introduce a package of fiscal reforms focused mainly on tax restructuring upwards.

Both income tax and sales tax laws are expected to decrease exemptions and increase rates.

Such measures were included in both the voluminous studies of USAID over the last five years and in the last agreement with the IMF.

The government insists that the basic merit of these reforms is not greater tax revenues, but their corrective impact and their long-run development implications.

Jordanians at large do not want to hear of more austerity measures, regardless of their rationale. They have reached the point of fatigue.

What adds fuel to the blazing fire is the fact that people only see a worsening of their personal budgets. To them, the increased private-to-public sector transfers resulted in great dead waste, or money lost in the process.

People attribute dead loss (loss which is incurred by the people but not gained by the government) to two main factors: mismanagement of funds and claims of corruption.

Thus, the government faces big challenges, not necessarily caused by this government. Blamed is this government’s predecessor as well, and some criticism goes back to all governments, in the last 50 years.

The main challenge is for the government to succeed in convincing a parliament that stands adamant against new tax laws.

But without tax amendments, the government will not be able to draw the large soft loan from the IMF, which hinges on the passage of these laws.

Assuming that the laws are passed, the King instructed the government not to allow them to negatively impact the incomes of middle and lower income groups. But that is where most of the added revenue is expected to come from.

Should extra taxes be imposed on businesses and rich people, it will still be only a while before the tax is shifted to workers and employees in the form of higher prices.

The level of public services delivery has witnessed a serious decline as a result of a rapidly expanding population. Jordanians, as a result, have lost faith and seek better but costlier alternatives in the private sector.

Moving towards self-reliance requires a new social contract and more democracy: better and more effective political parties and a consensual vision, with all Jordanians agreeing to ensure its successful implementation.

We are in for hard times. But a terrible beauty could be born out of them.

 

 

The writer is a former Royal Court chief, deputy prime minister and member of Senate. He contributed this article to The Jordan Times.

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