IMF: Income tax reform is critical to lowering Jordan’s public debt

Director of the IMF's Middle East and Central Asia Department Masood Ahmed said that income tax reform is critical to lowering Jordan’s public debt and without it, future generations of Jordanians will carry the burden of repaying that debt.
In an interview with Petra on the economic situation in the Middle East on the sidelines of the IMF's meetings in Washington, he said that what income tax reform does is that it ensures that people are paying their fair share, that companies and individuals who evade taxes are prevented from doing so, and that unproductive exemptions are eliminated.
He voiced belief that that the current version of the income tax law is an important step toward tax reform. "But, we also see that the law could be more ambitious, in particular by lowering the personal income tax threshold Jordan is indeed an outlier compared with the region in this regard,".
"The Jordanian government is continuing to implement their IMF-supported economic program, be it on the energy, fiscal, monetary, or structural fronts, the latter including continued efforts to enhance the business environment," Ahmad added, noting that the program is expected to stay on track through 2014.
On Energy projects, The IMF official said the reform of the electricity sector is on track to return the electricity company NEPCO to cost recovery in the medium term. "The authorities’ strategy includes not only reforming electricity tariffs while protecting the poor, but also diversifying energy sources, increasing the electricity generation capacity, and enhancing energy efficiency. Such a strategy will guarantee a reliable supply of electricity to Jordanian families and businesses. It will also help lower public debt and the country’s high energy import bill, " he added.
Jordan’s key challenge, he added, is to create jobs amidst ongoing fiscal consolidation. "These jobs will need to be generated by the private sector, as employment in the public sector as well as emigration to the Gulf can no longer absorb as many Jordanians as they used to. And while the gradual reduction of government financing needs will make more space for the private sector in the medium term, policy efforts should be made now to ensure that this sector can operate in a business-friendly environment,".
Ahmad said fostering such an environment for small and medium-size enterprises (SMEs) is important in this regard, as they have been shown to be key vehicles for growth and employment creation, noting that this includes removing impediments to their access to finance.
The Jordanian authorities have taken a number of steps in this regard through actively seeking donor support for SMEs financing, establishing a first credit bureau expected to be licensed soon which will improve banks’ selection and monitoring of debtors and thus ease access to credit.
The IMF official urged the Parliament to pass key legislation designed to foster financial inclusion including the secured lending and insolvency laws.