With a gigantic deficit of at least JD1.4 billion on our back, it seems that pointing out the country is drowning in debt is simply an understatement these days. While some are asking where that money actually went, the natural government reaction is of course to tax the people who are already struggling to make ends meet. Yes, perhaps one of the better policies to emerge in recent times was the decision not to tax incomes under 1,000JDs and that is arguably representative of the vast majority of Jordanians whose income is no where near that figure. However, in lieu of this taxation, one’s income is taxed on pretty much everything that moves under the Sun. From staple goods like rice, sugar, coffee and tea to blood. Yes, blood. You know that joke that the only thing left for the government to tax is air, well I’m pretty sure that it’s not only true these days, but that there are probably policies in place that tax air as well, framed nicely as an environmental policy.
When times are financially tough, households will always tighten their belts. This is a natural reaction of the people. If you suddenly make less, or if you suddenly have to pay more for what your dinar is worth – then tightening the belt is in order. In other words, when times are tough people look to their own households (or purses) to put things in order. The higher and more comprehensive the taxation, the greater the tightening, which of course is a natural reaction that never helps a government climb out of debt, especially when it needs people to spend and thus fuel the machinery that is the national economy.
However, the important part here is that the people look to themselves first, usually because they have no other option. The government seems to rarely do that. When economic plans are announced regarding addressing the deficit, they usually involve new taxes. But how many times has the government announced that it will look to tighten its own belt? I would argue that it is a rare occurrence. In the past 12 months, while new taxes are introduced some of the biggest cases of corruption have appeared and then, ever so promptly, disappeared – never to be heard from again. Were they resolved? Was the money, which at times stood in the millions, ever recovered? Corruption, it seems, continues to be on the rise in the public sector and this is just judging by the amount of press coverage it has received in the past year alone. It is an industry that represent millions upon millions of dinars leaking through a public sector in shambles. If one is drowning in a sea of debt does he not look to at least attempt to plug the holes in his own boat first?
What about over-expenditure? What about mis-expenditure? Is the government in a position to do some self-reflection and determine what it does and doesn’t need in terms of its own expenditures? Based purely on observation, every year it seems we see government officials being driven in the absolute latest Mercedes or SUV – and this is despite the presence of a policy determined to encourage the purchase of hybrid cars. Do these vehicles alone not represent millions – do their consumption of fuel (which comes out of the taxpayer’s pocket) not represent millions?
Or how about the state-owned Jordan Television, which somehow manages to house 1,850 employees, 300 of whom are just gardeners; 150 of whom are just drivers. If the minimum wage of JD150 is applied here (just as an example) then those 300 gardeners represent JD45,000 monthly, or JD540,000 annually. The 150 drivers represent JD270,000 annually. This is just in one public institution. I’m not calling on everyone to be fired, I’m simply asking if JTV needs 300 gardeners and/or 150 drivers?
The list goes on and on, and I’m sure if one simply analyzed the cabinet’s budget for the year they’d see unnecessary expenditure at a time when belts require tightening. It is actually in the government’s interest to tighten its own belt simply because it not only costs it a whole lot less than taxing the people, but because getting people to spend will inevitably yield higher returns a la the multiplier effect.
Leadership,Leadership,Leadership.
We are in a dire need of leaders. People who can motivate the public. Leaders who can make people care again.We don’t need leaders who only preach. Talk is cheap.
Courage is lacking. The system is broken. The process is flawed.
1- Can you imagine an Arab country whose leader declares the sources of his income?
2- Can you imagine that leader tightening his belt and selling his luxurious cars,yachts,planes,and unnecessary residences.
3- Can you imagine the government moving from its prime location to a more modest one.
4- Can you imagine the ministers and the PM all riding in Civics or Priuses.
5- Can you imagine the ministers proposing a freeze on their own salaries until things get better?
6- Can you imagine the budget put online where we, the public, can see where our money is going?
Symbolism is powerful. Lets break the symbols of the past and the present so as to we can believe in the future.
Lala land.
great article…perfect
A small comments on raising taxes.
I start to believe that the Laffer ideas on the return of taxation is in full swing in the case of Jordan. I am wondering whether the chief economists at the government understand, or even heard, about Laffer curve. For those who would like learn about the Laffer curve, see the video at this link http://www.youtube.com/watch?v=fIqyCpCPrvU. In fact, the first 2 minutes will be enough.
Five years ago, I attended a private briefing by some a Prime Ministry economists for the preparation the National Agenda. In one of the nicely done slides, the presenter indicated that Jordanians are taxed the highest in the region. Again, it makes me wonder whether policy makers read or refer to their own research.
Finally, as indicated by Laffer himself, the idea he introduced were originated by Ibn Khaldoun in the 12th Century. Another reason for all of us to know more about the Laffer curve concept.
” I’m not calling on everyone to be fired, I’m simply asking if JTV needs 300 gardeners and/or 150 drivers? ”
Nas , I got object to the statement of yours
The real and most important question that should be raised , how much money are we forced to spend on the lavish life style of royal family? how much money are we spending on her majesty {dresses, jeweleries and extra}and what about his majesty?, how much are spending on his majesty private trips abroad ? how much are the royal family is costing us in paying their salaries? those are the question that should be raised in Jordan NOT how much those poor gardeners are costing us?
@Mohanned: I generally agree with your points.
@3ala2: thanks for reading
@Taisir: hmm, i’m not sure to what extent the laffer curve is applicable here (i’m sure it is to “some” extent) as people earning 1,000 or less are no longer taxed for their income, which is obviously the overwhelming majority of the country. however, their purchasing power is obviously also eroded as the government taxes pretty much anything and everything that a worker can spend on. these taxes, while relatively heavy, seem to fluctuate. I don’t think they’ve yet reached a point where the government feels they are counterproductive (in my opinion).
@The Free Jordanian: regarding royal family spending, which is something mohanned touched on and i realize the sensitivities of poking this sleeping giant of an issue – i realize that in our country we can no more question what a deputy-minister or a judge makes than we can a member of the royal family. this lack of transparency has naturally fueled rumors and conspiracy theories long before i was even born, and they continue to prevail amongst Jordanian society to this day.
i can’t really claim to be in-the-know here as the royal family’s earnings are shrouded in complete secrecy. i can only attempt to analyze what is known to me and to the public-at-large and in this case it is the misplaced expenditure in various government institutions, which, yes include 300 gardeners. i understand when you say “poor gardeners” , but you also have to ask yourself, if you had a house in jordan with a nice plot of land, would you hire 300 people to tend to it everyday? this is of course just as an example – transportation was another and there are many others if one merely looks at the state budget.
those are the only examples i can truly and logically question because there are numbers and figures to deal with. regarding the royal family or anyone else for that matter, i really have no clue.
suffice to say, the underlying problem that mohanned was pointing out here was not necessarily a lack of leadership per se (although that is an issue) but rather the lack of transparency. without transparency there is no information and without information there is not accountability and without accountability…etc…etc..
Jordan’s problem is a tax code that rivals Qatar, whilst as a country having the income revenues of Zimbabwee….for instance the UK increased highest income tax bracket to 51%, Egypt has 22%, and guess what Jordan does in response to its huge deficit? REDUCE the rate for the super rich from 22% to 14%! 14% for those making millions on sale of land and stocks…also UK capital gains tax 18%, you know how much on stocks in Jordan? ZERO!! our income tax rates are LESS than switzerland!
with a tax code written by the rich for the rich, no wonder ur heading towards bankruptcy…
Honestly this whimsical approach to economy is dangerous, you just can’t be playing wheel of fortune with economic policy. Especially with a country that lacks the resource to cushion and soften some of the blows that it’s bound to get. I’m certainly looking forward to the end of the year since we might be partying like it’s 198 –oops 99
@Londoner: i don’t know what the line of thinking is there, but i assume the idea is that the rich are more likely inject money in to the economy…however you want to define “inject” (consume, invest, banking, etc). the problem obviously is that most goods are barely affordable by most people. in other words, the majority are now getting less for what they used to pay and that is continuing to decline.
@bambam: can we buy a vowel? 🙂
Naseem,
Leadership entails the traits you mentioned. Leaders’ failure to act in such a manner represents a great danger to the nation.
The TV issue can be looked at as a microcosm of the overall state policy. Spend your way to “stability”-a political one for that matter. Now the definition of “stability” can be debated depending on the interests of the party that is concerned with such stability.
All in all, there is a foundational flaw in the transparency and accountability processes.Leaders need to walk the talk.Checks and balances at ALL levels must be installed.
@Naseem,
On a side note: Dollars is what you should be buying,not vowels.Dollars as in green dough ;P
@Nas,
Whether a Jordanian income is JD 100 or a JD1000/year, he/she has to pay all kind of indirect and direct taxes and fees when spending the money. Aside from sales tax, we pay extra fees on every single service that we get and on every application that we fill. Laffer curve is applicable and you should not narrow its applicability to income tax. As indicated, earlier we are over taxed. I still believe that additional taxes and levies will reduce the taxable threshold of economic activities and will result in less tax revenues. Moreover, it will scare foreign direct investment even with all the exemptions.
In recent years, the government of Jordan reduced custom taxes in perfumes and fragrances and the result was an increase in the total collectable revenues. Why? The high tax on perfumes encouraged smuggling activities since it was worth it. With low level of custom tax, it is not worth the risk.
Generally, any state failure is a step towards democracy. Despite that the current stress is different than that of 1989, but that (along with West Bank political detachment) ended in abolishing martial law and reinstitute of Parliament.
But again the society is shattered and no real associations are there to foster change as parties, unions, and organizations in a society that lacks institutional balances. There is no foreseeable vehicle to ride for changes, except of course backward demands that construct balances rather than equality and democracy on one hand, or nonsystematic big headlines empty program kind of system.
Where our money are spent
If only i had the mandate to just go around the government ministries and switch off the lights in the daylight or turn off the central heating where its well over 30 C …the list can go on on ..
When our centers of decision making, be they in the parliament, government or royal courts are pretty much exclusively chosen from the richest in the country, it should not be any surprise that there are absolutely no incentives to increase the tax rate of the highest bracket.
My perception is that we have one of the most unfair tax codes in the entire world with such a high sales tax, and such a low income tax rate at the highest bracket. It should be the complete opposite.
I heard that our money ends up in Las Vegas after someone gambles with it… I won’t say who that cool someone with perfect English is, I’m sure you all understand me.. As Naseem said, lack of transparency ignites rumors.
Why wouldn’t there be any transparency if nothing out of the ordinary is going on?! Trust me, I heard this a lot of times from high profile people who KNOW better, our money gets spent in Las Vegas and the big whales eat it! No kidding!!
On the other hand, our gov is letting us know about many of the issues we’re facing right now such as the deficit. Albeit the fact that we’re moving slow, this is a step forward in terms of transparency and democracy as well.
We still got a long way to go though. With people like you Naseem who truly care about Jordan, I am for once optimistic about reform.