Protests Erupt in Jordan Over Tax Hike

  • Posted on: 10 June 2018
  • By: laila Akel

Image Resource: The Times

RedCrow Blog

June 10, 2018

The largest anti-government protests in five years erupted in Jordan on May 30, 2018, the start of a multi-day demonstration opposing International Monetary Fund (IMF)-backed tax reform that appears to be aimed at raising additional tax revenues. Critics believe the increases, in the form of a proposed tax law, would worsen already dire living standards in the country. Jordan currently suffers from high unemployment, at 18.5%, with 20% living near poverty Protests came with calls for the resignation of Prime Minister Hani al-Mulki who refused to scrap the bill, deferring the decision to parliament in hopes it would reach a compromise on the bill aligning with IMF recommendations to get the economy back on track.

As one of the most stable Middle-Eastern countries, the growing economic frustrations and calls for resignation in Jordan reflect mounting economic challenges in the country. This recent action to increase tax revenues is tied to a series of economic reforms that begin in 2016 when Amman secured a $723m three-year credit line from the IMF. The IMF says on its website that the loan is aimed at reducing Jordan's public debt from ~94% of GDP to 77% by 2021, through "revenue-enhancing reforms to the tax system.” However, the economic situation has seemingly worsened in Jordan. Beginning in January 2018, the government began instituting repeated price increases on basic staples and goods, from bread to internet subscriptions, under which fuel prices increased five times and electric bills jumped 55%.

The proposed law (Income Tax Law no. 34) was approved by the Jordanian Cabinet on May 22, 2018, and is yet to be approved by parliament. It appears to be intended to increase tax revenues by placing an income tax on employees of more of five percent, and taxing employers an additional 20 and 40 percent, among other measures. While a number of proposed changes still need to be debated – specifically regarding the tax treatment of companies in Jordan - the law is likely to come into effect on January 1, 2019.

Amidst the protests on Saturday, May 26, King Abdullah II voiced his concern with the new tax law stating that “it was unfair for citizens alone to shoulder the burden of financial reform, stressing that shortcomings in providing vital services such as education, health care and transport would not be tolerated”, according to The National. Further, the King called for a “comprehensive and reasonable national dialogue” on the new tax law to be led by parliament, according to Aljazeera.

Now with the resignation of Prime Minister Hani al-Mulki on June 4, 2018, King Abdullah II will be selecting a new prime minister in an effort to preserve peace and stability the country. On Tuesday, June 5 he appointed education minister Omar al-Razzaz as interim prime minister and tasked him with forming a new government. The King requested a full review of the tax system, as well as immediate action to begin discussion of the proposed tax law. The effort is aimed at appeasing widespread anger over the series of price hikes taking place this year and now the proposed income tax reform bill. As the Jordanian Army moves in to secure Amman, al-Razzaz will move forward on efforts to review the proposed law and King Abdullah II will seek possible permanent candidates for prime minister.

While the resination of al-Mulki could help appease protesters in the short-term, they are primarily opposed to the draft tax law and price hikes. Without further action the situation is likely to worsen, as the Bani Sakhr tribe has already taken to Twitter to speak in support of overthrowing the government. Other groups are expected to speak out and potentially take action should King Abdullah II and the new prime minister fail to take appropriate action to improve Jordan’s economic situation. Outside of Imman, protests have rocked several other cities, including Irbid, Jarash, Zarqa and Maan, and could stretch to other cities, as well.

The RedCrow Blog provides timely intelligence, coverage and analysis of potential security and threat incidents in conflict zones in the Middle East North Africa (MENA) region. RedCrow is a company that provides a subscription-based technology platform with live intelligence feeds, which assists clients in identifying and avoiding threats both tactically and strategically.