Confronting a spiraling debt and a bloated public sector, Jordanian Prime Minister Omar al-Razzaz publicly introduced a new tax bill on September 11, having promised significant action by 100 days in office. Yet his signature tax law faces heated opposition. On September 15, activists angrily shut down a session of government ministers trying to explain the legislation in the southern city of Tafileh. “We will never accept any version of any income tax law,” one Tafileh resident insisted. The next day, citizens expelled an official delegation from Ma’an from a panel discussion presenting the tax law. And an October 1 poll showed that approximately 75 percent of citizens urge parliament to reject the legislation. This opposition to Razzaz’s bill echoes frustration that peaked only four months ago.
In June, fierce protests had erupted against former Jordanian Prime Minister Hani al-Mulki’s income tax law, endorsed by the cabinet on May 21. Facing intense demonstrations far larger than the ones in December 2017 against the U.S. Embassy transfer to Jerusalem, King Abdullah replaced the prime minister, citing “unjust taxes”—a familiar trick to defuse protests through nominal change while remaining the same. Soon after Razzaz became the new prime minister on June 7, he withdrew the despised tax bill. But the Jordanian government still understood that an updated tax bill was key to the nation’s fiscal health, since only approximately four percent of citizens pay income tax, and annual growth (its traditional source of revenue) has fallen to about two percent in recent years. The state thought it would be easier to advance a tax law when protests seemed to have died down.
Yet Razzaz’s new tax legislation is eerily similar to the shelved bill. Starting in 2019, the Razzaz version will require individuals earning over 9,000 Jordanian dinars ($12,700) per year to pay income tax compared to 8,000 dinars ($11,300) in the Mulki version—and double for families under both bills. The tax rates for banks dropped slightly from 40 percent under Mulki’s bill to 37 percent in the updated Razzaz version. The legislation aims to gain 280 million dinars ($395 million) in additional revenue in 2019, 180 million dinars ($254 million) of which will come from increased taxes and the rest by cracking down on an estimated 132,000 Jordanian companies committing tax evasion. On September 24, the Jordanian cabinet approved an updated version of the tax bill before sending the legislation to parliament on the following day.
The government faces a dire budget crunch. Jordan’s debt-to-GDP ratio soared to 96.1 percent in 2018, and Amman made almost zero progress toward the International Monetary Fund’s (IMF) 2016 proposal to reduce this ratio to 77 percent by 2021. If the Razzaz administration were to disregard the IMF’s call for a fiscally sound tax law, it would likely lead outside investors to flee the kingdom and rating agencies to downgrade Jordan’s credit rating, plunging the country into a deeper economic crisis.
With Jordan’s spiraling debt of $37 billion, Amman is further stretched by hosting such a large Palestinian and Syrian refugee population, strains that will be exacerbated since Washington announced on August 30 that the United States would cut aid to the UN Palestinian refugee agency (UNRWA). UNRWA, which received $364 million from the United States in 2017, oversees health clinics serving 1.1 million Palestinian refugees and provides education for 120,000 children in Jordan. The country’s public schools are already overburdened by a “mass shift” of 50,000 students from private to public schools, with parents unable to afford high tuition fees, and by accepting approximately 130,000 Syrian children in Jordanian schools as of the 2017-2018 academic year. While Jordan announced on September 28 that donor countries raised an additional $120 million in response to the U.S. decision, the overall reduced assistance to Palestinian refugees will still strain Jordan’s ability to provide educational services.
Recognizing that this necessary bill would be unpopular, the government unveiled a slick website explaining the law and is actively promoting the bill on social media. Razzaz also sent ministers to advocate for the bill in cities far from the capital on September 17, after unveiling it but before submitting it to parliament, trying to show the public that he was interested in their input and valued their perspectives prior to finalizing the law. However, despite these efforts, Razzaz faces unfair misinterpretations of his tax bill by many citizens, just as Mulki did. Many Jordanians worry they will be unable to pay taxes because they cannot find work—disregarding the fact that no one unemployed will be forced to pay a single dinar and that both bills would still have exempted about 90 percent of the population from paying income tax.
Husam Abu Ali, head of Jordan's Income Tax Department, also appeared to go too far in attempting to promote the bill, saying, “This law is specifically designed to achieve social justice and to help the poor” by giving the government funds to expand services, particularly healthcare, transportation, and education. However, additional government revenue does not necessarily improve this dearth of services—which combined with a rising unemployment rate, currently at 18 percent, has provoked the wrath of many across the kingdom. Significantly, few trust the government to use increased taxes to improve conditions given longstanding corruption. After being ranked 45 out of 167 countries in Transparency International’s 2015 Corruption Perceptions Index, Jordan dropped 14 slots in the 2017 index, ranking 59 out of 180 countries.
Jordanians fear the government will collect more of citizens’ limited fiscal resources while still maintaining the status quo of inadequate public transportation, crumbling government infrastructure, and endemic corruption. Citizens are therefore demanding better social services prior to bearing the brunt of a tax hike. Jordanians launched a social media campaign using the hashtag al-islah qabla al-driba or “reform before the tax.” For instance, on September 17, one activist called out the government for preventing Jordanian women from passing along citizenship to their children when they marry foreigners, but considering these children sufficiently Jordanian for taxation. Other citizens demanded that the government combat corruption more aggressively and redirect illegally spent sums to improve welfare programs.
Healthcare inequality also remains a longstanding concern for activists, with one Amman hospital so overcrowded that multiple children were placed on a single bed. Many Jordanians are still feeling the pain from the government’s January decision to nearly double bread prices. Frustration with the education sector is high, since in recent years not a single student in hundreds of Jordanian high schools has been able to pass the General Secondary Educational Certification exam, known as the tawjihi.
In a bid to address activists’ grievances, Razzaz noted on September 21 that funds from the additional taxes would be used to improve transportation and healthcare in addition to fiscal issues, and that to address ongoing political stagnation, he would work to make Jordan a parliamentary government within two years. But, since citizens have heard promises of reform for many years but seen little tangible change, activists are skeptical of Razzaz’s rhetoric.
Razzaz so quickly recycling the tax law that was shelved just four months ago reinforces the monarchy’s support for the bill. With the June protests leading to such significant instability and Mulki’s downfall, it would be unimaginable for Abdullah not to play a key role in backing this critical legislation. If the king were opposed to the bill, he could force Razzaz to resign in a similar manner to Mulki’s recent departure, yet he has not shown any indications of doing so. And Jordanians who frequently back the king’s policies have escalated attacks on social media against critics of the tax bill.
Amman has similarly attempted to shield King Abdullah from backlash against the unpopular law by assigning blame to Mulki. By contrast, official state media depicted the king as intervening on behalf of the people by freezing a separate fuel tax on June 1, winning the praise of regime loyalists. Once again, the king has delegated to Prime Minister Razzaz the challenge of promoting the tax bill in local media interviews while the king, despite his more influential position, focuses his attention on more comfortable political subjects for his domestic audience, especially the Palestinian conflict.
Even so, there has been mounting criticism even from among the political elite. “Perhaps the beginning should be correcting the public sector’s failed management approach, taking serious action to combat rampant corruption and rebuild trust between the citizen and the state,” tweeted Prince Hamza bin al-Hussein, the half-brother of King Abdullah, on September 25. Member of Parliament Saddah Habashneh warned Razzaz on September 26 that he should “withdraw the [tax] law or fall like Hani al-Mulki.”
Paradoxically, the king’s frequent dismissal of prime ministers has only reinforced the status quo. Firing Mulki and withdrawing the initial tax bill cleared protesters from the streets, offering the next government another chance. Although Razzaz’s tax law is important to cut the climbing national debt, citizens frustrated with longstanding corruption appear unwilling to give the government this chance. In the absence of the government providing tangible economic improvements, many citizens have vowed to fight Razzaz’s tax bill or other fiscal austerity measures, making it more difficult for Amman to tackle its debt crisis. This time, demonstrators’ ire may no longer be pacified with the king’s musical chairs game, shuffling out premiers while keeping the same despised tax policies largely intact.
Aaron Magid is a Middle East analyst at Tesla Government, a U.S. government contractor providing open source research. Follow him on Twitter @AaronMagid.