Tax
evasion poses a significant challenge to economic stability, entailing the
deliberate underpayment or nonpayment of taxes mandated by law. While
accurately gauging the full extent of this issue proves inherently complex,
numerous studies and reports underscore its potential magnitude. It is crucial
to distinguish between tax evasion, constituting the illegal underreporting or
non-reporting of income to evade taxes, and tax loopholes, which are legal
provisions within tax codes that enable individuals or entities to lessen their
tax obligations. Due to its clandestine nature, pinpointing the precise scope
of tax evasion presents inherent challenges.
اضافة اعلان
In
a 2021 report by the International Monetary Fund (IMF), it was observed that
despite Jordan's efforts to broaden its tax base and enhance tax compliance,
the nation relied on indirect taxes such as sales tax. The report emphasized
the imperative of addressing tax evasion and bolstering the effectiveness of
direct tax collection, notably income tax, for the nation's fiscal well-being.
While the IMF report refrained from precisely quantifying tax evasion, it
underscored the significance of tackling this issue and addressing loopholes to
bolster Jordan's financial landscape.
Notably,
these estimates may fluctuate depending on the methodological approaches
employed and should be interpreted judiciously. While these estimations convey
a concerning portrayal of tax evasion's repercussions on economic advancement
and the delivery of public services in Jordan, it is essential to recognize the
problem's origins and the strategies deployed to combat it. Despite the elusive
nature of quantifying the financial hemorrhaging arising from this issue,
available evidence substantiates the gravity of tax evasion and the inequitable
utilization of tax avoidance schemes in Jordan.
While
the IMF report refrains from furnishing a specific numerical assessment of tax
evasion cases in Jordan, it underscores an acknowledgment of the issue's
severity, concentrating on the broader ramifications of loopholes and tax
exemptions. In a report by the Jordan Strategy Forum (JSF), the estimated
impact of combating tax evasion in Jordan approximated 2 percent of the gross
domestic product (GDP), where the GDP is estimated at $52 billion.
Consequently, over a billion dollars in revenue are forfeited due to unreported
income tax liabilities, highlighting the substantial economic losses incurred.
Utilizing
tax-saving strategies and leveraging legal provisions within Jordan's income
law extends beyond the purview of small businesses and individuals. In fact, it
is a practice observed among certain large corporations, exemplified by the
strategic maneuvers employed by some Jordanian banks. These institutions
exploit tax loopholes, notably through allocations for doubtful collections, in
a manner that stretches the bounds of legal legitimacy.
One of the prevailing tactics is the
use of doubtful debts, which are not issued by a court ruling but instead are
only bad debts according to specified standards by the tax law. Although banks
compensate for these lousy debts by insurance companies, per the arrangements
concluded between banks and insurance companies, banks continue to pursue
defaulting borrowers indefinitely. This occurs notwithstanding that these
values are acquired from insurance companies in accordance with insurance
contracts, where the loans are insured basically by the borrowers themselves,
who pay the insurance amount on the loan as a prerequisite for loan approval.
The doubtful debts are also tax-deductible from the banks' profits to determine
the net taxable profit.
In
alternative scenarios, banks incorporate allocations for doubtful debts into
subsequent budgetary cycles or utilize active insurance proceeds originating
from prior years to inflate profits artificially. This maneuver serves a dual
purpose: enhancing profitability metrics and facilitating share sales, mergers,
or the company's exit from the Jordanian market. It is noteworthy that Jordan's
Income Law prohibits the revision of tax records beyond four years from the
initial assessment year, underscoring the strategic timing employed by banks to
evade audit review.
In
conclusion, tax evasion impedes Jordan's economic stability, posing challenges
beyond mere financial losses. The distinction between tax evasion and legal tax
reduction strategies is crucial, highlighting the complexity of addressing this
issue. Efforts to combat tax evasion must be multifaceted, encompassing
legislative reforms, enhanced enforcement mechanisms, and improved data
collection and analysis. By addressing these challenges head-on and
implementing effective strategies, Jordan can safeguard its fiscal health and
promote a fair and equitable tax system for all.
Disclaimer:
Views expressed by writers in this section are their own and do not necessarily reflect Jordan News' point of view.
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