Making the Economy Political in Jordan’s Tax Revolts

Since early December 2018, protesters have gathered every Thursday in Amman’s Fourth Circle in the Zahran District in opposition to a revised version of the unpopular tax bill introduced last June. That original legislation had sparked a broad-based tax revolt across Jordan, which quickly turned into an informal referendum on the failures of neoliberal development—including diminishing social services, lower wages and rising unemployment. While the December 2018 and January 2019 protests echoed the economic refrains of the original June tax revolt, the tax protests took on a political character after the monarch approved the revised law.

These renewed protests were spearheaded by a broad coalition of Jordanians tired of a long-standing Hashemite strategy of undermining the civilian government and promising reform. After sacking Prime Minister Hani Mulki in June, King Abdullah II appointed Omar al-Razzaz, a former World Bank economist who previously served as Jordan’s education minister, as the new prime minister. The king tasked al-Razzaz’s cabinet with launching a new national dialogue as a step toward developing a revised tax bill. Al-Razzaz was also asked to review the entire tax system, “with the aim of delineating the relationship between citizens and the state through a clear social contract that identifies rights and duties.”

The original June protests quieted as a watchful public waited to see whether change was on the horizon. Opposition to the tax reforms remained broad, uniting Jordanians from diverse class and geographic backgrounds against the political establishment and economic elites. When government ministers toured the country in September 2018 to promote modified legislation, local delegations in the southern governorates of Maan and Tafileh and northern Jerash and Ajloun expelled the politicians and firmly rejected the bill.

Despite these clear negative signals, the new tax bill received parliamentary and monarchical approval, and went into effect on January 1, 2019. Since the law appeared in the Official Gazette on December 2, 2018, protestors have returned to Amman’s Fourth Circle every Thursday, angry with not only the new tax system and a flagging economy, but also with a political process that fosters corruption and absolutism. To satisfy protestors, the monarchy will need to establish the terms of a new social contract, which require far-reaching economic and political reforms that reach the highest levels of Jordanian political and economic power.

An Obsolete Social Contract

From the early decades of Jordanian statehood, the Hashemite regime cultivated a broad social contract that insulated the ruling elite from demands for political inclusion by providing government jobs and public services to key constituencies.^[1] The government used foreign aid inflows to subsidize basic commodities and expand the public sector to bolster national employment. Under this arrangement, citizens tolerated minimal political rights in exchange for state jobs and economic patronage.

Under King Abdullah II, however, Hashemite strategy has pivoted away from this welfare-based social contract, instead favoring the interests of a rising capitalist elite and the withdrawal of welfare provisions and government supports. King Abdullah II’s neoliberal economic reforms of the early 2000’s restructured the public and private sectors concurrently without dismantling the patronage networks of his father’s era. These networks, reliant on state institutions and funds, began to falter without being completely dismantled as state policy shifted toward private interests.

Both the diminishing nature of state resources and the widening grievances of Jordanian protesters necessitate a solution to this political-economic crisis. The will and resources to sustain the old social contract are dwindling, but no coherent alternative has emerged.

Thursday protesters from the middle and lower classes feel that they are therefore being asked to shoulder a double burden due to the erosion of long-standing entitlements and increased taxes. For that reason, income tax reform is considered one of the most controversial bills on the Jordanian legislative agenda. Among the Fourth Circle protestors, for example, Ahmad from Madaba^[2] described his motivation for protesting in terms of restoring the prior arrangement: “We want to return to the original social contract that we Jordanians agreed on with the monarchy: the protection of the throne for the attainment of a decent life.”^[3]

Population growth, refugee inflows and variations in external revenue from the Gulf Cooperation Council and western donors, however, haveinhibited the regime’s ability to continue to finance the old contract while Jordanian citizen’s pocketbooks bear the burden of adjustment. Ghaith, a public sector employee, cited his meagre income as his main reason for joining the protests. He makes 380 JD (US $535) per month, which he says is insufficient to meet his basic needs. He and other young Jordanian workers are “wasting their lives on jobs that cannot provide a decent living.”^[4]

As state welfare provision contracts, the state’s demands for increased tax revenue has hit Jordanians hard. The new tax law widens the base of income taxpayers by reducing the annual household income that is tax exempt from JD 24,000 ($33,778) to JD 18,000 ($25,334). Exemptions for individuals were also lowered, from JD 12,000 ($16,889) to JD 8,000 ($11,260). Al-Razzaz’s government argues that the new law does not affect most Jordanians because a majority earn income below the new tax threshold: As much as 80 percent of workers registered with the Jordanian Social Security Corporation earn less than JD 7,200 annually.

This winter’s Thursday protesters continue to express similar economic grievances to those raised in June 2018. Protesters predominantly come from the professional and middle classes, and certain provisions of the new law are directly at odds with their interests. Protestors in June directed much of their ire at the fact that the proposed tax bill would increase their tax burdens without providing for adequate public services and support in education, healthcare and finances that they rely upon. A national poll taken at the time found that 77 percent of Jordanians supported protest action to prevent the tax increases. Although the bill was the most progressive tax legislation since King Abdullah II took power in 1999, it was regressive in comparison to the tax laws introduced in the 1980s and 1990s. In addition, the revised bill passed in January was even more regressive than the original June reform because it cancels the deductible allowances of JD 4000 ($5,630) for personal expenditures for education, medical treatment and interest payments on personal loans.

Moreover, since June 2018, protestors have also used the tax bill as a vehicle to demand greater public oversight of the political process and express criticism of the government. For Farah, a young professional translator, the June strikes were the first protest action that brought her to the street. In December, she returned to the Fourth Circle again to protest the proposed tax law’s economic effects on the middle class but also expressed frustration with the broader political process. Whatever economic measures were eventually adopted by the government, she said, “What matters now is that we are fed up with uncommitted promises […] we do not want to be fooled again by the regime.”^[5]

Political Corruption and Neoliberal Reforms

Although economic grievances often take pride of place in response to the tax law, protesters largely blame Jordan’s broader economic crisis on the political establishment and its cozy relationship with elite economic interests. Ghaith shares the view of many that “[i]f the government revised the tax exemptions for the powerful capitalists and combated tax evasion, it would not need to raise taxes on the poor.” Protesters’ responses to the tax legislation typically speak to a more fundamental rejection of politics as usual, which they view as corrupt and benefiting only a small national and economic elite.

These perceptions are symptomatic of the economic liberalization policies implemented since King Abdullah II was crowned in 1999. Under the late King Hussein, the government was run by a cadre of professional public servants and bureaucrats who upheld the established patronage network. King Abdullah II, however, has turned to a different set of elites to set government policies and run its affairs, primarily the Ammani business and capitalist classes. This reality is not lost on the protestors who took to the streets this winter. Several protestors expressed their view that the privatization and austerity reforms of the last 20 years were designed to benefit a corrupt capitalist elite.^[6]

Bringing capitalists and neoliberals into government has blurred the lines between public and private interests. The capitalist political elite quickly adapted the political rules of the ancien regime for their private gain. Parliamentarians who also have private companies may be tempted to steer government policies and expenditures in a direction that favors their interests. Without substantive political reforms, economic liberalization resulted in a less inclusive political system in Jordan than under the previous king. Hisham, a Jordanian lawyer who was among the protesters, told us, “We want true economic reform [and] revision of the privatization policies […] We want those policies to benefit all Jordanians, not only a few persons.”^[7]

Most Jordanians believe that the government is not serious about tackling corruption and that the majority of parliamentarians evade taxes while the rich skim off the top. Hisham again connects the economic reforms to the political system: “Election laws gave us a group of moneymen and contractors [in power]. Those laws failed to produce genuine representatives of the people.”

Indeed, a recent report in the Jordanian press found deep links between parliamentarians and private business, with 60 percent ofparliamentarians holding shares worth some US$775 million in approximately 460 Jordanian companies. Additionally, parliamentarians are privileged with access to public tenders amounting to hundreds of millions of JD.

Questioning the Monarchy’s Control

The tax law ratified on January 1, 2019 underscores the need for serious political restructuring of the unequal relationship between the monarchy and the civilian government, which has been a key theme among Fourth Circle protestors. The monarchy’s ultimate power is often illustrated by its frequent removal of the existing government in response to popular grievances, playing the role of the pressure valve, and allowing the government to take the fall for unpopular decisions. Moreover, the monarchy often overrides the government in response to popular complaints, subverting the authority of the ministerial cabinet. These powers have become even more pronounced in light of 2016 constitutional amendments that granted expanded powers that concentrated control of the judiciary, foreign policy, defense and security in the hands of the monarch.

That the monarchy often sidesteps his cabinet and calls the shots was recently exemplified by successful concessions gained by protestors on other hot-button issues, such as the controversial lands in Baquorah and Ghummar leased to the Israeli government under the 1994 peace treaty. Although the government was expected to allow the Israeli state to continue using the land, the king responded to protestsagainst this prospect in October by unilaterally terminating treaty provisions governing these lands when their 25-year lease expired on October 25.

This anecdote highlights a fundamental tension in the unfolding drama over Jordanian state-society relations. Although the 1994 Peace Treaty between Jordan and Israel was negotiated by the prime minister and his cabinet, the king repeatedly steps in to resolve issues that should be the domain of elected officials.

While King Abdullah II frequently references his commitment to a future devolution of power to the prime minister and his cabinet, his actions throughout this period of upheaval and dissent demonstrate that true power remains reserved for the monarchy and select elites. By defaulting once again to such conservative policies, the king is trying to confine the terms of the debate to the economic sphere, but veteran opposition figures and young protesters alike have reached a consensus that structural change cannot be confined to the economy alone. Sofyan, a communist activist since the 1970s when political parties were banned, described the situation as one of arrested institutions. “The cabinet has no authority over state institutions […] All the authority is concentrated in the hands of a one man. The king is the only decision maker in the country.”^[8] The monarchy must make the first move to open Jordanian parliamentary politics because the king “is the only individual capable of making decisions about reform. The government lacks authority.”^[9]

Both the diminishing nature of state resources and the widening grievances of Jordanian protesters necessitate a solution to this political-economic crisis. The will and resources to sustain the old social contract are dwindling, but no coherent alternative has emerged. Instead, the regime appears trapped under the political weight of its large public sector, locked in by patterns of dependence and distribution. At the same time, the few businessmen and capitalists who have benefitted from the new status quo have an interest in maintaining a weak parliamentary system because it allows them to direct policy and pillage the state’s resources. Any new social contract will have to establish new, more inclusive ways of distributing state benefits while increasing fiscal capacity. This kind of reform will be a herculean task as long as the political will to enact tangible and inclusive political reforms remains elusive.

In the face of the government’s weakness by design and an elite culture of cronyism and corruption, the Jordanian citizenry remain unwilling to pay more taxes. The old system no longer works, but the way forward demands that Jordan’s leaders address the need for substantive institutional reforms in both the economic and political systems that currently govern Jordanian lives. Any new social contract between the ruler and ruled cannot function by raising taxes while withdrawing services to struggling lower and middle classes.

Endnotes

^[1] Tariq Tell, The Social and Economic Origins of Monarchy in Jordan (New York: Palgrave Macmillan, 2013).

^[2] We use pseudonyms to protect the identities of the protestors and activists whom we interviewed at protests held in Amman’s Fourth Circle area between December 1, 2018 and January 10, 2019.

^[3] Interview, December 13, 2018.

^[4] Interview, December 6, 2018.

^[5] Interview, December 6, 2018.

^[6] Interviews with Qassem, December 1, 2018; Saed (an activist), December 1, 2018; Saleem (a leftist activist), January 1, 2019.

^[7] Interview, December 13, 2018.

^[8] Interview, December 1, 2018.

^[9] Interviews with Alaa (writer), December 1, 2018, and Isa, December 20, 2018.

How to cite this article:

Laith Fakhri Al-Ajlouni, Allison Spencer Hartnett "Making the Economy Political in Jordan’s Tax Revolts," Middle East Report Online, February 24, 2019.