Talal Abu-Ghazaleh Forum’s Tax Committee Issues Report on ‘Tax Evasion’

AMMAN – Talal Abu-Ghazaleh Knowledge Forum’s Income and Sales Tax Committee issued a report explaining that tax evasion is sometimes associated with tax-related stakeholders including, tax legislation, Income and Sales Tax Department and staff, taxpayers, tax consultants or (tax authorized agents) among others.

Tax Law
Stability in the investment environment is dependent on laws and legislation, particularly the Tax Law. The report stated that the Tax Law and other relevant regulations have undergone many amendments during the last seven years leading to confusion in the investment environment. This instability in legislation led to the practice of tax evasion by medium and small-sized enterprises. Additionally high tax rates of  up to 20% applied to some sectors, based mainly on an individual’s personal income,  further increased evasion practices. On the other hand, the report suggests that by decreasing such rates, the tax base would increase and prevent evasion.

The report also stated that most of the provisions and articles of the Tax Law are related to collecting taxes and penalties while there are no references to rewarding or offering incentives for compliant taxpayers. This type of motivation, according to the Committee, would lead to increasing freewill and voluntary compliance which would eventually reflect positively on increasing tax revenues.

Income and Sales Tax Department
The report revealed that one of the reasons for tax evasion is the lack of competent cadre at the Income and Sales Tax Department due to lack of training and professional development, lack of an appropriate work environment and low-incomes which undermine the employees’ work and credibility.
The report also refers to the regular audit process as a waste of time and effort mainly for compliant taxpayers, since the relationship between the Department and other relevant stakeholders is based on distrust and skepticism. Ongoing constructive communication is required in order to restore trust between the two parties.
 
Taxpayers
According to the report, taxpayers’ ignorance of the Tax Law explains the increase in unintentional tax evasion that is at a much higher level than  intentional evasion, not to mention the lack of trust between taxpayers and the Tax Department which prevents taxpayers from revealing their real incomes and revenues. Another contributing factor is the lack of conviction by taxpayers at acquiring personal benefits or privileges for compliance.

Tax Consultants/ Tax Authorized Agents
The report recommended the necessity for introducing clear and well-defined legal texts pertaining to the qualifications of tax agents and the importance for ongoing communication between the Department and the agents through regular meetings to discuss their respective problems problems that will lead to the establishment of mutual respect and trust between the two parties. 

The report called for constant coordination with Jordan Income and Sales Tax Experts Society which has the required expertise and capacity to regulate tax consulting in the country.