(MENAFN- Jordan Times) Economists on Sunday favoured raising tax rates on large companies as the best way to lower the budget deficit, which is feared to double its estimated levels.
The experts, interviewed by The Jordan Times to comment on the government's decision, taken on Saturday, that increased prices of 95-octane gas and electricity tariffs on large consumers, said policy makers should consider other measures that have become "inevitable" to bring the state deficit to safe levels.
The projected deficit in the 2012 budget is JD1.02 billion but the government of Fayez Tarawneh has recently revised estimates included in the state budget law, forecasting the financial shortfall to double due to the expected rise in public expenditures and a drop in revenues.
Economist Zayyan Zawaneh said that the current government "has a historic opportunity to protect the Kingdom from a looming economic crisis through a set of necessary measures that should be taken sooner than later".
The government should raise tax rates on banks, telecommunication firms and mining companies, the analyst said, stressing the need to also adopt the progressive tax regime, which he said is included in the Constitution.
Zawaneh, a former adviser at the Central Bank of Jordan, the Ministry of Finance and the International Monetary Fund, indicated that the large number of independent government institutions, whose spending bill for 2012 is estimated at around JD1.8 billion, is a major problem for Jordan's economy.
"The government should at least cancel 30 independent agencies and the public sector performance would not be affected," he emphasised, saying that Jordanians cannot afford to finance spending bills of "two governments": the state budget and the budget of independent public bodies.
Pointing out that stopping the squandering of public finances should also be a must, Zawaneh criticised expanding the number of ministers in the government, which stands at 30, noting that 20 qualified ministers can do the job.
"Reducing the number of ministers can also lower the cost of the pension bill, which is increasing sharply," he said.
Abed Kharabsheh, a professor of economics at the University of Jordan, agreed that raising tax rates on large firms will generate more revenues to reduce the deficit.
He supported a progressive tax system on taxpayers whose annual income is more than JD24,000 and increasing tax on banks but in a way that can prevent capital outflows.
Qassem Hammouri, a professor of economics at Yarmouk University, suggested combating tax evasion allegedly practised by non-limited income professionals, such as doctors, lawyers, engineers and merchants, indicating that the government should work to return "stolen public funds", which he estimated to be worth billions of dinars.
"If the government can return 50 per cent of the stolen money, this will make a big difference to the state finances," he said.
Responding to economists' remarks, Finance Minister Suleiman Hafez said he mentioned the solutions the government must take in the short term during his speech before members of the Lower House on May 15.
Among immediate solutions, he said is to amend the Income Tax Law by adopting a progressive tax regime on companies, particularly banks and mining firms, in addition to speeding up procedures related to reducing the number of independent public institutions.
Commenting on Saturday's government decision to increase the prices of the 95-octane gas from JD0.795 to JD1 per litre and "adjust" those of liquid gas sold in bulk, heavy oil, fuel sold to local and foreign jet planes, kerosene sold to vessels and asphalt, the experts said the decisions will not have a direct impact on medium- and low-income Jordanians.
The Cabinet also approved a new electricity tariffs system under which the prices of electricity sold to banks, hotels, mining firms and other corporate consumers will be adjusted.
However, Kharabsheh explained that the sectors affected by price increases will try to reflect the rising costs of products and services on consumers, adding that many motorists will shift to use the cheaper 90-octane, which is currently sold at JD0.62 per litre.
Zawaneh said the recent decisions may weaken the competitiveness of the Kingdom's economy, such as exports and the tourism sector.
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