Jordanian chips' lovers might bite more than they can chew. Under the second phase of the General Sales Tax (GST) initiative that would come into force as of January 1, 2001, chips' importers will be subject to a 13 percent sales tax, which consumers will end up paying. Currently, crisps' importers pay custom duties ranging between 12-30 percent on their goods, and are exempt from the 13 percent sales tax.
The intent to levy an extra sales tax, according to importers, makes a rise in chips' prices inevitable. “The new tax leaves us with two options, lowering the quantity of chips per package, which is very improbable, or increasing the price,” said Omar Zumot, head of one of the largest chips importing companies.
“The new tax will necessarily mean a 13 percent rise in the retail price of crisps,” said Zumot, who imports international chips' brands such as Lays, Doritos, and Quavers. “Chips belong to fast moving items with a low profit margin.
“We must raise prices to compensate for the extra charge we would be incurring at the importing end,” explained Zumot. “We face fierce competition in this market in terms of cost, size, and price,” Ahmad Huji, sales supervisor at Aram and Hagoub, another big importing company.
“Hence, the idea of reducing the quantity of chips in the packages is out of the question,” he added. “A hike in the prices of chips will inevitably take place next year,” he told the Jordan Times.
Both interviewees agreed that the tax is unfair, especially as chips were long considered as an all time favorite for kids. “Chips is more than a snack for a child. It is a part of a child's life nowadays said Zumot.
A chips' enthusiast said that the higher price won't convince her to buy less of her favorite snack, but that this would be at the expense of other things”. I will not stop purchasing crisps, but when prices go up, I will ask my parents for more money, or I will cut my expenses on other stuff,” said the student, preferring anonymity.
However, some praised the decision to levy this tax. “I am for any sales tax on junk food,” said one government employee.
Last May an amendment was made to the Sales Tax Law, under which new products will be subject to the 13 percent tax, while another group will be exempt, starting 2001. 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 30 million Jordanian dinars in extra windfall when the second phase of the (GST) Law takes place. “We forecast JD20 million to be raised through taxes imposed on merchants, retailers and wholesalers, and JD10 million through recent changes on the commodities' exemption list,” Eyad Kodah, general sales department director general had earlier told the Jordan Times.
Further sales tax revenues are expected from the natural growth in the various economic sectors, which, according to Kodah, is estimated to reach JD10 million. The growth in revenues, according to Kodah, will boost total revenues from the sales tax to around JD500 million for 2001, compared to nearly JD460 million to be received by the end of this year. — ( Jordan Times )
By Rana Awwad
© 2000 Mena Report (www.menareport.com)