Jordan will not impose new taxes in its proposed 2010 budget but will seek other means including a crackdown on pervasive tax evasion to help boost revenues crucial to lowering record public debt, the finance minister said on Thursday.
Mohammad Al Ississ told parliament’s finance committee that maintaining “fiscal stability” remained a main concern. The budget is expected to be sent to parliament in coming days.
Jordan is struggling under a three-year IMF program begun in 2016 to rein in a public debt that has hit a record 94 percent of GDP as part of long delayed structural reforms.
The government is seeking ways to increase revenues without resorting to new taxes that could fuel the same anger that triggered the biggest demonstrations in years when steep hikes including sales tax pushed by the IMF came into effect.
“We have to reach the necessary revenues to continue fiscal stability,” Al Ississ said.
The government has pledged cuts in public expenditure but is mindful of mass protests in neighboring countries, including Lebanon and Iraq, in the past month over eroding living standards and corruption.
Parliamentarians said they would reject any proposals to raise water or electricity fees as officials say they plan to adjust the tariff structure. Parliamentarians also want the government to reduce sales tax on essential food items to help low income Jordanians struggling with rising poverty.
Al Ississ said tackling tax evasion that officials estimate costs the treasury hundreds of millions of dollars annually would help improve government finances.
“We will fight tax and customs evasion with all the power of the law,” Al Ississ said.
Al Ississ said last week the government had little leeway in the coming budget, which last year stood at $13 billion. Jordan has some of the world’s highest government spending relative to its economy.
The specter of bigger spending surfaced when the government last October was forced to reach a pay deal with the teachers union in a bid to end a one-month nationwide strike.
The Cabinet also raised pensions for military retirees in what economists said was caving in to populist demands at the expense of fiscal prudence.
These moves combined have ravaged Jordan’s finances and alarmed an IMF mission holding consultations in Amman on progress with the reform program, officials and diplomats said.
Jordan was expected to ask the IMF for more time and either extend the existing program or put in place a new program altogether, diplomats said. Officials said they would resist any IMF effort to push Jordan to adopt more austerity measures that risked increasing instability and civil unrest.