Jordan’s next premier dodges tax crisis but big problems await

Jordan’s incoming prime minister defused his first political minefield after unions welcomed his plan to reconsider a proposed income tax increase that sparked widespread protests and brought down his predecessor.

Prime Minister-designate Omar Al Razzaz told reporters in Amman that the tax bill would be withdrawn for review once his new cabinet is sworn in — as King Abdullah II had instructed. The Professional Associations Council, the union that spearheaded the protests, called for an end to the demonstrations, the semi-official Al Rai newspaper reported.

But while Al Razzaz — a Harvard graduate, former assistant professor at the Massachusetts Institute of Technology and World Bank country manager — breezed past that hurdle, he’ll have a pile of economic challenges to deal with once his cabinet is installed.

The International Monetary Fund is pushing Jordan to take the kind of austerity measures that led to the downfall of Al Razzaz’s predecessor on Monday. Trade and foreign investments have declined, unemployment is at its highest in 20 years, and foreign aid that it relies on to support its finances has shrunken. The influx of 1.5 million Iraqi and Syrian refugees has strained the finances of a nation whose public debt equals its economic output.

Those who know Al Razzaz, like Maha Yahya, director of the Carnegie Middle East Centre in Beirut, say he’s got the temperament and patience to deal with complex issues and bring people together.

“I can’t think of anyone more qualified than him to be in this position right now, given the critical juncture Jordan is on now,” Yahya said. “But whether he will have the support that he needs from the international community and from within Jordan, that’s another question.”

The king must spearhead the reforms himself while developing a participatory political system so citizens have a say in how decisions are made, said Rami Khouri, a professor at the American University of Beirut and fellow at Harvard Kennedy School. “You need to have political buy-in by all the people in Jordan,” he said.

Boost revenue

The government had been attempting to pass the draft tax law under an IMF-supported reform programme designed to to curb evasion and boost revenue. It proposed lowering the threshold for taxable income, eliminating some tax breaks, and increasinglevies on some businesses. Protests escalated last week after energy costs were hiked.

The king suspended the increases but that wasn’t enough to appease protesters, who demanded the withdrawal of the tax bill and dismissal of Prime Minister Hani Al Mulki’s government, which resigned on Monday.

In a statement Thursday, the IMF said “bold reforms” were needed to address unemployment. It urged the international community — including regional donors — to shoulder more of the burden of hosting Syrian refugees.

Ryan Bohl, Middle East and North Africa analyst at Texas-based Stratfor consultancy, said Saudi Arabia and the United Arab Emirates could ease the pressure to rapidly proceed with reform measures the IMF is pushing by ponying up $500 million this year. That, in turn, would help Al Razzaz’s standing with the Jordanian people.

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