Construction contractors call for lower taxes

AMMAN — Contractors are demanding that the Income and Sales Tax Department reduce the tax on net profit to 10 percent after new instructions raised it to 12 percent. They highlight that the construction sector has been going through financial problems and difficulties for years. اضافة اعلان

The sector’s financial problems were reflected when the government delayed paying financial dues to the construction contractors even when the value of these dues reached approximately JD300 million in 2019. 

Tarik Al-Hurini, general secretary of the Jordanian Construction Contractors Association, told Jordan News that the government has finally paid all these dues. “Our problem nowadays is not with the government. It is with the Income and Sales Tax Department, we want corporate income tax to be reduced,” he said.

In an official letter sent to Prime Minister Bisher Khasawneh and viewed by Jordan News, the association explained that the construction sector consists of many different people working in all governorates, who have been negatively affected by the financial difficulties the sector has been facing, the syndicate claimed. 

The association also claimed that when the contractor faces financial difficulties, the rest of the supply chain will be affected too, whether with regards to equipment, machinery, and even employees, which contributes to the postponement of the contractors’ work. 

The association warned that the faltering and bankruptcy of contractors leads to the displacement of workers who supports thousands of families. 

It also pointed out that the high rate of sales tax on equipment and machines further stagnates the sector, calling on the government to reduce the tax to help revitalize the sector. 

Moosa Al-Tarawneh, official spokesman of the Income and Sales Tax Department, told Jordan News that there is coordination between the department and the syndicate to reach a solution that satisfies both parties.

“There is a committee to follow up on this case, and the president of the contractors association comes on a daily basis to the department. Both parties are working to reach a solution. We are giving it lots of attention and we are working hard to find a solution,” Tarawneh said. 

Ahmad Al-Yaqoub, president of the Jordanian Construction Contractors Association, confirmed to Jordan News that conversations are ongoing with the tax department. “We have some problems with the manager, and we do not know when this will come to an end,” he said. “This is after confusion in the interpretation in the amended Article 16 in Regulation No. 156 Paragraph A, which includes ‘the adoption of a corporate income tax percentage of not less than 10 percent of the revenues due and received as the case may be.’”

The regulation, which was issued in the Official Gazette at the end of October 2019, stipulated the reduction the construction sector’s corporate income tax rate from 12.5 percent to 10 percent, the abolition of the filing fee of 500 dinars, and calculating the tax on the amounts received, not the total of the projects.

Yaqoub claimed that two-thirds of the Kingdom’s working population are employed in fields that have some degree of interaction and relationship with the construction industry, emphasizing that their industry has faced many difficulties since the beginning of the coronavirus pandemic. “This industry is the prime mover for all other industries and sectors in the Kingdom; it should be given more attention and more support,” he said. 

Fahmi Al-Katout, an economist, told Jordan News that the tax placed on the contractors is considered to be high, taking into consideration the difficult circumstances the Kingdom is facing, especially during the pandemic. 

Katout agreed that the Income and Sales Tax Department should reconsider reducing this tax. “Reducing it would have a great positive impact on all other sectors,” he said.

A contractor, who spoke on the condition of anonymity, told Jordan News that for a period of time there was a lack of financial grants and a lack of internal funding, which led to a financial crisis in the sector.

The contractor confirmed that things are slowly getting better. “For example, it is not allowed, nowadays, to start any construction projects unless there are financial allocations. This decision has helped a lot. Before 2018 it was fine to start construction projects without the presence of the financial allocations,” he explained.

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