Economists react to decision to reform customs duty

Prime Minister Bisher Al-Khasawneh announces a restructuring of Jordan’s customs tariffs at a press conference on January 9, 2022. (Photo: Petra)
AMMAN — Prime Minister Bisher Al-Khasawneh’s announcement Sunday that there will be a restructuring of Jordan’s custom duty regime has taken Jordanians by surprise including most economic experts. Previously, there have been 11 categories pertaining to local custom duties, and Khasawneh stated that these categories will be reduced to four down from 11.اضافة اعلان

There was no mention of such sweeping restructuring before by this government. The aim, the prime minister said is to streamline the process of clearing at borders, empower consumers and prevent corruption. Jordan News asked local economists about their reaction.

According to the prime minister, the decision to reform custom tariffs through a reduction of the rates will have a beneficial effect on local suppliers and merchants, and that it will also ease their business operations due to a reduction in overall costs and time. Khasawneh also highlighted that such a measure will lead to an improvement in the local purchasing power by consumers, due to the impact of lower prices.

Jordanian economist Mazen Irshaid told Jordan News that while he is not fully aware of the extensive details surrounding the new measures, he feels that a more elaborate explanation on the new reforms is needed to better understand their impact. “The announcement was clear, but I feel that it would be helpful for economists to know how much the average rate of custom duties for all goods and commodities was before these reforms and what the average will be now with these new measures. More details about this would be rather informative for analysts.”

“It is entirely possible that the average custom duty rate for all imported goods before these reforms (when the range was between zero and 40 percent range) was, hypothetically, 18 percent, and that now, after these reforms have reduced the range to become between 0 to 25 percent, the average custom duties rate for all goods could actually be 20 percent, which would indicate that the average rate would be higher after the introduction of these reforms, compared to before their introduction. Of course, we do not know if this is actually the case, but this is why it is very helpful to know about the average custom duty rate for all goods, both before and after these reforms,” Irshaid said.

It is difficult to determine if these new economic measures are truly a positive step for Jordan without acquiring more data on the average rate of custom duty for all goods of last year and this year, Irshaid added. He also said that these tariffs are almost always paid by consumers and businesses.

Economic expert Wajdi Makhamreh told Jordan News that such economic measures are usually discussed with the Ministry of Finance and that the true impact of these measures will need to be studied before rushing to conclusions, adding that such studies will likely “take between six months to a whole year”. He also said: “It is worth asking if the government has consulted the appropriate stakeholders related to the Jordanian import industry before taking such measures.”

If tariffs were to increase in the future, the main beneficiary of such an increase would mainly be the government, Makhamreh said, because tariffs are a type of revenue that is generated by the government. “Since a reduction of the custom duty rate on imported goods could possibly lead to a decrease in revenue for the government, this should lead us to ask about whether or not the government will find alternative ways to compensate for this potential loss in revenue.”

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