A recent flurry
of complaints has surfaced yet again about the spread of mail orders and the eased
customs regulations on packages valued at less than JD200, placing customs
fees/taxes at JD5–10 per package. The attack on mail orders has focused on the
losses to the importing merchants as customers choose to purchase through mail
orders.
اضافة اعلان
However, the
arguments used are not only remiss but also one-sided and lack
comprehensiveness.
Retailers in
Jordan complain that such a practice, allowing packages of mail-order purchases
to enter the Kingdom at such a small fee, is harmful to them and the government
budget (they claim that the government loses out on what can be more revenue in
customs). Hence, they are asking for a revision of current regulations.
Additionally, they claim that those who purchase through mail-ordered packages
risk being sold fake products and will suffer from being unable to return the
items.
Such a baffling and innovative array of taxes fees can best be described as a comedy of compiled errors. Can you imagine what a dilemma tax compliance is for importers?
The claim
regarding the budget is meant to urge the government to tax the mail parcels
further. Such an argument is bogus as it is unlikely that the government would
generate any revenue if it were to depart from the current regulation and go
into over-taxation. Simply put, people would stop buying through the mail, and
the government would lose the revenue it currently generates from the current
1.1 million mail parcels per year.
Also, it is
well established in the economic literature that if a tax rate is doubled, its
deadweight loss (the overall economic loss in an economy caused by a new tax on
a product) will quadruple. In other words, the excess burden on the economy
(buyers and sellers) will increase faster than revenue increases. It is,
therefore, important when suggesting policy changes to consider not only the
change in government revenue a tax increase would cause but also the increased
deadweight loss the tax increase would perpetuate.
Furthermore,
many of those that use mail orders from overseas are guaranteed the
authenticity of the products (while some stores in Jordan offer fakes unbeknown
to the buyers) and are offered return policies, including money-back guarantees
that are not commonly available in the retail stores in Jordan.
The real problem that retailers suffer from when it comes to imports is not mail parcels but the high and numerous taxes and fees.
Moreover,
people who order goods via mail seek alternatives, the newest or modern
varieties, and options that may not be available in the Jordanian market. Most
Jordanian retailers do not turn over their products quickly and keep displaying
old merchandise. One reason for this is the excessive taxation paid on such
products. Hence, buyers would not purchase the offered retail product because
it is not what they want. A policy such as raising taxation that limits their
choices is a lazy and blunt instrument, to say the least.
The real
problem that retailers suffer from when it comes to imports is not mail parcels
but the high and numerous taxes and fees. Jordanians pay 121 types of taxes and
fees. Look, for example, at some of the taxes that importers face: Tariff tax,
unified additional tax, general sales tax, fines, deposits, and insurance, fees
for combustible materials, payments to revitalize tobacco cultivation, rewards,
and endeavors, universities, and municipalities, subsidy fees for agricultural
products, other department fees, veterinary fees, passport fees, livestock
census fees, stamp fees, fees for displaying cinematic film, overload fines,
walking fees, road tolls, drawing paintings of Jordanian products, inspection
fee, additional tax, social affairs tax, insurance for Al-Hussein City for
Youth, insurance for the Directorate of Civil Aviation, taxes for
municipalities, taxes for universities,
additional tax, and import fees.
Such a baffling
and innovative array of taxes fees can best be described as a comedy of
compiled errors. Can you imagine what a dilemma tax compliance is for
importers? Also, they have to pay the import duties and fees whether they end
up selling the product, which explains why retailer turnover of goods is
extremely low.
A policy such as raising taxation that limits their choices is a lazy and blunt instrument, to say the least.
Alas, the
creativity of the legislature and executive branches of government in the
search for a fistful of dinars and a few dinars more is truly baffling. Instead
of restricting people’s choices as a policy response, let’s lower the taxes and
fees, which is where the problem lies. It is not the fault of people that they
decide to maximize their own choices and utilities; and it is not a bad that foreign producers
and shippers are mass customizing and shipping efficiently; in developed
countries where customs duties and fees are low, governments hardly ever face
such a complaint about mail orders.
Yusuf Mansur is CEO of the Envision Consulting Group and former minister of state for economic affairs.
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