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Middle East and Central Asia > Jordan

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Cover IMF Working Papers
Personal Income Taxes in the Middle East and North Africa: Prospects and Possibilities
Mario Mansour
and
Eric M. Zolt
Personal income taxes (PITs) play little or no role in the Middle East and North Africa, often yielding less than 2 percent of GDP in revenue—with the exception of few North African countries. This paper examines how PITs have evolved in recent decades, and what they might look like in the next 20 years. Top marginal tax rates on labor and business income of individuals have declined substantially, a trend that mirrors reductions in advanced and developing economies. Taxation of passive capital income has changed very little, and the revenue intake from this source remains low throughout the region (less than 1 percent of GDP on average and concentrated in oil-importing non-fragile states). Social security contributions (SSC) have increased in importance in nearly all MENA countries, and some countries have introduced additional payroll taxes. The combination of reduced marginal tax rates, light taxation of income from capital and business activities, and increase of SSC, have resulted in income tax systems that create disincentives to work and incentives for informality, and contribute little to government revenue and income redistribution. Given differences in economic and political structures, demographics, and starting points, the path to PIT/SSC reforms will vary across the region. Countries with relatively mature PIT/SSC systems, where revenue performance has improved in the past two decades, will increasingly need to balance the revenue and equity objectives against effciency objectives (in particular labor market incentives and infromality). Countries with no PITs will have to weigh whether a consumption tax/SSC system that mimic a flat tax on labor income is sufficient to diversify revenue away from oil and whether to adopt PITs to address rising income and wealth inequality. Finally, fragile states, who face more political volatility and weaker fiscal institutions, will have to focus on simplicity of tax design and collection to be able to raise revenue from PITs.
Keywords:
Personal income taxes; social security contributions; payroll taxes; fragile and conflict states; Middle East and North Africa; Gulf-Cooperation Council; SSC reform; SSC system; revenue performance; PIT objective; PIT revenue; Personal income tax; Income tax systems; Income; Income and capital gains taxes; Corporate income tax; North Africa; Middle East; East Africa; Global
Cover IMF Staff Country Reports
Jordan: Second Review Under the Extended Arrangement Under the Extended Fund Facility, Requests for a Waiver of Nonobservance of Performance Criterion, an Extension of the Arrangement, and Rephasing of Access-Press Release; Staff Report; and Statement by the Executive Director for Jordan
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Jordan’s Second Review under the Extended Arrangement under the Extended Fund Facility, Requests for a Waiver of Nonobservance of Performance Criterion, an extension of the arrangement, and rephasing of access. Discussions highlight that the Jordanian authorities have preserved macroeconomic stability, maintain a prudent monetary policy, and ensured a sound financial system. Jordan faces a challenging environment—including low economic growth, high unemployment, and elevated public debt—underscoring the importance of swiftly implementing policies and reforms to bring public debt on a downward path, boost investment and productivity, and enhance inclusive growth. The enactment of long needed growth-enhancing reforms is encouraging, including the secured transactions law, the bankruptcy law, and the business-inspections law. The international community has strongly supported the new government’s commitment to maintain the reform momentum, strengthen growth, and reduce public debt. The London Initiative in February 2019 has helped unlock essential budget grants and concessional financing to support the authorities’ reform program.
Keywords:
ISCR; CR; executive board assessment; electricity company NEPCO; NEPCO; reform effort; reform; access budget grant; reform public sector; telecommunication company; Income and capital gains taxes; Income tax systems; Arrears; Global
Cover IMF Working Papers
The Design of Fiscal Reform Packages: Insights from a Theoretical Endogenous Growth Model
Andrew Hodge
This paper studies the impact on growth, welfare, and government debt of fiscal reform packages in a theoretical model drawing together three key features of the endogenous growth literature: (i) investment in technology (in the form of human capital) offsets diminishing marginal productivity of private capital, allowing for perpetual growth in output per capita; (ii) changes in investment behavior because of cuts to distortionary tax rates impact long-run growth; and (iii) public capital has a role influencing total factor productivity and growth. A quantitative simulation using reasonable parameter values suggests that modest capital and/or labor income tax cuts and public investment increases have significant positive effects on consumer welfare but small effects on per capita income growth, where fiscal costs are offset by reductions in unproductive government spending. Capital income tax cuts and public investment increases continue to boost welfare when offset by consumption tax rises (rather than spending cuts), although the welfare benefits of modest labor income tax cuts are outweighed by the costs of a compensating consumption tax increase.
Keywords:
WP; physical capital; Fiscal policy; Endogenous growth; physical capital goods; private physical capital; reform BGP; public capital; constant returns to scale; capital share; consumer welfare; Human capital; Capital income tax; Public investment spending; Personal income tax
Cover IMF Working Papers
Effect of Corruption on Tax Revenues in the Middle East
Patrick A. Imam
and
Ms. Davina F. Jacobs
This study estimates the impact of corruption on the revenue-generating capacity of different tax categories in the Middle East. We find that the low revenue collection as a share of GDP there compared to other middle-income regions is due in part to corruption, and certain taxes are more affected than others. Taxes that require frequent interaction between the tax authority and individuals, such as taxes on international trade, seem to be more affected by corruption than most other types of taxation. This suggests that if governments need to raise more tax revenues in a way that minimizes distortions and maximizes social welfare, they should implement reforms that either reduce corruption or raise revenues from tax categories that are less susceptible to corruption. Possible reforms of the revenue system and administration are examined.
Keywords:
WP; direct tax; country; government; tax
Cover IMF Working Papers
Revenue Administration Reform in Middle Eastern Countries, 1994-2004
Mr. Jean-Paul Bodin
and
William Joseph Crandall
The paper provides an overview of revenue administration reforms implemented in Middle Eastern and North African countries over the past decade with IMF assistance. Although reforming tax and customs administration is neither quick nor simple, several countries in the region have embarked on comprehensive programs of reforms to modernize their revenue administration, and encouraging progress has been achieved. Experience shows that there are many challenges to be faced and that critical requirements need to be met, including political commitment, strong leadership, willingness to abandon ineffective practices; and establishment of reform projects with clear mandates, agreed objectives, and realistic timeframes.
Keywords:
WP; administration; country; tax administration; tax; VAT; Revenue; customs administration; value-added tax; Middle Eastern country; tax administration organization; IMF's revenue administration advice; modernized revenue administration; revenue administration area; income tax administration; transition Customs administration; IMF's revenue administration assistance; tax authorities; reform programs; Tax administration core functions; Customs administration core functions; Value-added tax; Income and capital gains taxes; Middle East
Cover IMF Working Papers
Fiscal Revenues in South Mediterranean Arab Countries: Vulnerabilities and Growth Potential
Mr. Karim A. Nashashibi
This paper reviews the fiscal revenue performance of Southern Mediterranean Arab countries (SMCs) over the last decade and compares this performance with selected middle income and Organization for Economic Cooperation and Development (OECD) countries. These revenues have been declining over the past few years, and this trend is expected to continue because of a fall in mineral receipts and trade liberalization. Individual income tax yields are substantially lower than in other regions but the introduction of the value-added tax has proven to be highly successful. Higher trade protection than in other regions must be reduced, if SMCs are to be integrated into the global economy. Loss of nontax and customs revenues can be offset by reforms in income tax systems, petroleum product pricing, and by ensuring, through flexible exchange rate policies, that competitiveness is maintained
Keywords:
WP; GDP; yield; excise; income tax; state; Southern Mediterranean Arab countries; tax revenue; VAT; petroleum pricing; exchange rate; GDP ratio; tax yield; tariff revenue; income tax reform; custom duty; VAT yield; privatization proceeds; yield stem; public finance; Nontax revenues in SMCs; currency appreciation; Income and capital gains taxes; Income tax systems; Excises; Trade liberalization; Maghreb
Cover Recent Economic Developments, Prospects, and Progress in Institution Building in the West Bank and Gaza Strip
Recent Economic Developments, Prospects, and Progress in Institution Building in the West Bank and Gaza Strip
Milan Zavadjil

Abstract

Since the Declaration of Principles on Interim Self-Governing Arrangements between the Palestine Liberation Organization and Israel, which outlined the gradual future transfer of responsibility to the Palestinian Authority in the West Bank and Gaza Strip, the IMF has provided a wide range of technical assistance to the Palestinian Authority. This publication, by the Middle Eastern Department, reviews economic and institution building developments in the West Bank and Gaza Strip in 1996 and assesses briefly the prospects for 1997. Individual chapters describe fiscal, monetary, and external developments; trade policy; and IMF technical assistance.

Keywords:
BOOK; WBGS; WBGS balance of payments; FAD mission; deficit; regime; services deficit; PA's authority; deficit in the goods; responsibility to the Palestinian Authority; Income and capital gains taxes; Trade policy; Employment; Middle East; North Africa; East Africa