Jordan approves new IMF-backed tax law after introducing changes

Jordan’s Prime Minister Omar al Razzaz said on Sunday the kingdom will pay a heavy price if parliament fails to approve new IMF-backed tax legislation. (File photo / Reuters)
Updated 18 November 2018
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Jordan approves new IMF-backed tax law after introducing changes

AMMAN: Jordan’s lower house of parliament approved a new IMF-backed tax law on Sunday after introducing some changes in a move to help the cash-strapped economy move ahead with crucial fiscal reforms to ease record public debt.
A majority of deputies in the chamber approved a series of amendments in the 36-article bill that include raising family exemptions to mitigate any impact on middle class income earners.
The bill will still need to go to the upper house or senate for approval before it is enacted as law. It is expected to be effective early next year, officials said.
Earlier on Sunday, Jordan’s Prime Minister Omar al Razzaz said the Kingdom will pay a heavy price if parliament failed to approve new IMF-backed tax legislation.
Razzaz told deputies who were debating the legislation that failure to approve the bill would mean the Kingdom would have to pay even higher interest rates on its substantial foreign debt.
Razzaz said the law promotes social justice by targeting the wealthy and combats long-time corporate tax evaders, but opposition deputies argue it will hurt the already stagnant economy and diminish middle-class incomes.
“The individuals who will be affected are the top 12 percent income earners, it won’t affect middle and low income earners,” Razzaz told deputies.
The government sent the bill to parliament in September after withdrawing an earlier draft submitted by a previous government that triggered protests over the summer.
Earlier this year, Jordan increased a general sales tax and scrapped a subsidy on bread as part of a three-year fiscal plan agreed with the International Monetary Fund, which aims to cut public debt of $37 billion, equivalent to 95 percent of gross domestic product.
The debt is at least in part due to successive governments adopting an expansionist fiscal policy characterized by job creation in the bloated public sector, and by lavish subsidies for bread and other staple goods.
Rejection of the tax legislation would push even higher the cost of servicing over 1 billion dinars ($1.4 billion) of foreign debt due in 2019, raising the prospect of rating agencies downgrading Jordan’s credit ratings, Razzaz said.
“We will pay a heavy price if we don’t approve this law,” he said.
The government has also echoed IMF concerns that without these reforms public external debt will spiral.
Debt service would peak in 2019-2020 at about 6.5 percent of GDP with the Eurobonds that will be due.
The country’s economic growth has been hit in the last few years by high unemployment and regional conflict weighing on investor sentiment and as demand generated from Syrian refugee receded, according to the IMF.
Economists said Jordan’s ability to maintain a costly subsidy system and a large state bureaucracy was increasingly untenable in the absence of large foreign capital inflows or injections of foreign aid, which have dwindled as the Syrian crisis has gone on.


Iran’s Zarif says risk of war with Israel is great

Updated 17 February 2019
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Iran’s Zarif says risk of war with Israel is great

  • FM said Israel’s behavior violates international law
  • He also criticized Europe for not calling out Israel and US for illegal behavior in the region

MUNICH: Iran’s foreign minister on Sunday accused Israel of looking for war and warned that its actions and those of the United States were increasing the chances of a clash in the region. Addressing the Munich Security Conference, Mohammad Javad Zarif, also criticized the US administration after Vice President Mike Pence this week called on European powers to pullout of the nuclear deal with Iran. Zarif urged France, Germany and Britain to do more to save that accord.

“Certainly, some people are looking for war ... Israel,” Zarif said. “The risk (of war) is great. The risk will be even greater if you continue to turn a blind eye to severe violations of international law.”

Accusing Israel of violating international law after bombing campaigns in Syria, Zarif criticized European powers for not calling out Israel and the United States for their behavior in the region.

“Israeli behavior is putting international law on the shelf, US behavior is putting international law on the shelf,” he said.

Speaking to his cabinet on Sunday, Israeli Prime Minister Benjamin Netanyahu said Iranian belligerence was the main destabilizing factor in the entire Middle East.

“We must deny Iran nuclear weaponry and block its military entrenchment in Syria. We will continue taking constant action to ensure Israel’s security,” he said in remarks broadcast on Israeli media.

Europe falling short

Vice President Pence on Friday accused Iran of Nazi-like anti-Semitism, maintaining his harsh rhetoric against Tehran just a day he attacked European powers for trying to undermine US sanctions on the Islamic Republic.

Zarif said the US had an “unhealthy” and “pathological obsession” with Iran and accused Pence of trying to bully his allies.

“All in the name of containing Iran, the US claims, and some blindly parrot, that it is Iran that is interfering in the region, but has it been asked whose region?” Zarif said.

“Look at the map, the US military has traveled 10,000 kilometers to dot all our borders with its bases. There is a joke that it is Iran that put itself in the middle of US bases.”

Zarif, who said Iran was committed to the 2015 nuclear deal with world powers for now, also accused France, Britain and Germany of not doing enough to ensure Tehran received the economic benefits of that accord.

These three countries this month set up the Instrument In Support Of Trade Exchanges (INSTEX), a new channel for non-dollar trade with Iran to avoid US sanctions. But diplomats say it is unlikely to allow the big transactions that Tehran says it needs to keep a nuclear deal afloat.

Washington’s major European allies opposed last year’s decision by US President Donald Trump to abandon the deal, which also includes China and Russia, under which international sanctions on Iran were lifted in return for Tehran accepting curbs on its nuclear program.

“INSTEX falls short of commitments by the E3 (France, Germany, Britain) to save the nuclear deal,” Zarif said. “Europe needs to be willing to get wet if it wants to swim against the dangerous tide of US unilateralism.”