Confusion marked the initial implementation of the second phase of the General Sales Tax (GST), as some Jordanian shop owners applied different techniques while others went about business as usual as they professed ignorance of the law. Under the second stage of the GST, in force as of January 1, a general sales tax shall be imposed on the import or supply of goods and/or services unless such supply is exempted under this law.
There will also be a special sales tax on the import of certain commodities including alcoholic beverages and cement. Of the list of items that used to be subject to both the general sales tax and the special tax, only cars and soft drinks will undergo double taxation under the new phase of the GST.
The general tax was also reduced from 20-13 percent on some items, including cosmetics. The prices of cigarettes remained unchanged, while the prices of brand new cars are expected to rise, confirmed Eyad Kodah, director general of the General Sales Tax Department.
While the general sales tax will be levied at 13 percent of the value of the imported item or supply of goods and services, the special tax varies according to the kind of item and its quantity.
Jordan's one-stop shop titans, Safeway and Alahlia Superstore, charged the 13 percent tax on the shelf price of all items, which are subject to the law. Thus, if the price tag of a commodity is 10 Jordanian dinars, shoppers paid JD10 plus JD1.30 to the cashier. However, both stores said the measure was temporary.
"We are applying this mechanism until the stocks imported before January 1st are consumed," said Yousef Sukkar, director general of Alahlia Superstore. "Once the stock is sold out the prices of newly purchased goods which are subject to the law are expected to go down — before the 13 percent is applied. "Hence, the 13 percent tax will be imposed on the lower prices, which means consumers will bear no more than a 3 percent hike," anticipated Sukkar.
Safeway managers and cashiers suffered some confusion on Monday, January 1, but said the situation became clearer on Tuesday. On Monday, the tax was applied to items that were subject to the tax as well as others that were exempted.
Safeway General Manager Azzam Masri said the store felt obliged to apply the tax on items they were doubtful about. "There were items that we did not know were exempted until Tuesday, and thus we stopped collecting the tax on them," Masri told the Jordan Times. But he stressed that it will take no more than 10-15 days to reduce the shelf prices of goods, and then collect the 13 percent tax at the cashier.
Explaining the tedious job of remarking prices, Masri said: "We have around 120,000 items whose prices have to be reduced on the shelves." He estimates that when the price reductions are set and the 13 percent tax is charged, the consumer will only be paying an additional 2.6 percent on the purchased item.
At the entrance to the Safeway in Shmeisani, a large billboard alerts customers that shelf prices of items do not include the sales tax, and therefore the 13 percent will be charged at the cash registers. Officials at C-Town, another major supermarket, said its management has opted not to charge its customers the 13 percent tax, and instead will pay the tax themselves.
Some smaller shops were perplexed by the tax. In the Jubeiha neighborhood, a shop owner selling nuts and coffee was unaware the tax was to be applied starting Monday. "I still do not know which items are subject to the tax and which are not," said the thirty-something buyer, preferring anonymity.
Another said he will not charge the tax to his customers unless he is obliged to pay higher prices to his distributors and importers. The law defines a taxable person as anyone who imports or supplies taxable goods or services or both while he is registered or required to be registered with the department.
In addition, the law stipulates that the taxable minimum turnover for merchants is JD 250,000 and JD 60,000 for industrialists. There will be no minimum for importers. The new tax includes a refundable tax system for registrants.
As an example, explained Kodah, if the total cost of goods is JD 1,000, with the 13 percent added, the merchant would pay JD130 in sales tax, for a total of JD 1,130. The department will reimburse the JD130 to the merchant, and thereafter impose a 13 percent sales tax on the sale price of the goods.
Merchants harshly criticized the tax and have asked for a grace period before it is implemented, but their complaints fell on deaf ears. Last May, the Sales Tax Law was amended to bring more items under its purview, while exempting some items that were earlier taxed with effect from the new year. The amendment also unified the sales tax on both local and imported commodities.
In June 1999, Parliament approved a controversial amendment, increasing the sales tax from 10 to 13 percent. The amendment was one of 11 bills that were passed, so as to pave the way for Jordan's accession to the WTO and to facilitate the execution of the IMF-backed economic reform program.
Government officials expect more than JD 40 million in additional windfall revenues for the treasury from the second phase of the GST Law. — ( Jordan Times )
By Rana Awwad
© 2001 Mena Report (www.menareport.com )