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Reducing the Petroleum Derivative Tax in Jordan- Ahmad Awad

The recent significant increases in the prices of petroleum derivatives in the local market continually bring us back to discuss their causes and implications for the overall national economy.

Over the past two months, Jordan has witnessed extremely high petroleum derivative prices, which are among the highest, both in the region and globally. When accounting for income levels, we rank among the top ten most affected countries worldwide.

It is worth noting that a major factor in these soaring prices is the high tax rate applied to these products; the reason is not just an increase in global oil prices. This is not a secret.

The dangers of these continuous price increases do not just put additional financial strains on the vast majority of citizens and residents. They also undermine their economic and social rights, exert more pressure on the national economy, hinder innovation and economic growth, and raise concerns about the government’s vision for economic modernization.

The government’s continued imposition of a high fixed tax on petroleum derivatives aggravates the cumulative the tax burden. This is a concern for both the government and citizens and represents a significant challenge for our national economy.

Maintaining this high tax will further diminish the purchasing power of citizens and residents. Local consumer demand, a primary engine for inclusive economic growth, will weaken. Without change, we will not achieve a strong, balanced economy that positively impacts citizens’ lives or realize our economic vision, especially with these high indirect tax rates on petroleum derivatives.

While the government’s priority is securing consistent revenue to support the state budget and meet its societal and debt commitments, it should not neglect the impact of its policies on the economy and society. Fiscal policies should not only meet the state’s financial needs but also stimulate inclusive and consistent economic growth, benefitting all society and economic sectors.

We recognize the government’s commitments to the International Monetary Fund (IMF), especially as it prepares for a new program. Negotiations are expected next week during the IMF and World Bank annual meetings in Marrakech, Morocco. Still, this should not limit its broader economic considerations and reliance solely on the IMF’s narrow financial perspective, regardless of their assurances.

It is evident that the IMF prioritizes fiscal and monetary stability to enable governments to meet their debt obligations toward the fund. However, their experts often overlook who eventually bears the cost. In our experience and that of other nations, this typically results in decreased living standards, social protection, and an increase in societal disparities.

The government’s economic team should break free from this limited fiscal mindset and focus on broader economic reality to understand the effects of fiscal and monetary policies on various economic sectors. They should also distance themselves slightly from the IMF’s directives, aiming for a conducive environment that achieves major economic objectives, such as job creation and improved living standards.

In conclusion, this is a call to reduce the fixed tax rates on petroleum derivatives – even if only temporarily. Persisting with the current state, especially with high-interest rates, will strangle both the economy and society. This will hinder comprehensive economic growth, while unemployment and poverty rates will remain high or potentially increase, societal disparities will deepen, leading to multifaceted risks, including threats to national security and stability.

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