Telecom companies decry plan to hike income tax

AMMAN — Telecom companies on Wednesday decried the government’s plan to raise income tax on the “heavily-taxed” sector, whose profits have been witnessing a sharp drop over the past years.

Under the new income tax draft bill, which was announced on Tuesday, income tax will be increased on the telecom sector from 24 per cent to 26 per cent. In addition, all companies, including telecom firms, will pay around 1 per cent as a “solidarity tax” that will be collected to support scientific research and the poor.

“The government might generate 2-3 million dinars from the entire sector after increasing the tax, which is insignificant as state revenues, yet it will severely hurt the highly challenged telecom sector,” Orange Jordan Deputy CEO/CFO Raslan Deiranieh told The Jordan Times on Wednesday.

“There are no more big profits in the sector to be taxed. Why should the government tax our sector and leave the banks that generate more profits, while the sector’s revenues and profits have been declining over the past years,” he said.

According to estimates by the sector leaders, the government generated around JD25 million from the telecom sector in 2017 as income tax.

Telecom firms’ net profits declined from JD187.9 million in 2016 to JD77.2 million in 2017, they noted.

In the first half of 2018, the sector’s net profits declined by 11.6 per cent to JD33.4 million, compared with JD37.8 million in the first half of last year.

He attributed the drop to rising costs, increases in taxes, fees and energy prices, among others.

The executives said the sector is heavily taxed.

Mobile services, including calls, SMS and mobile broadband bundles, are subject to a fixed tax of 24 per cent as special tax, in addition to the General Sales Tax (GST) of 16 per cent applied to most goods and services. 

Mobile operators in Jordan pay a revenue share to the government equivalent to 10 per cent of their operating revenues, in addition to the said 24 per cent.

The government’s decision to increase the taxes on the sector represents a fundamental step back from the government’s previous pledges and commitments to implementing the directives of His Majesty King Abdullah to support the ICT sector, Zain Jordan said in a statement to The Jordan Times.

The government’s decision did not take into account the fact that taxes and fees that are imposed on the sector and telecom providers are one of the highest in the world, Zain said. 

The “sudden hike”, the company said,  “did not take into considerations investments’ needs for stable and fair financial legislation”. 

A source from the third telecom services provider, Umniah, said that increasing the income tax would adversely affect the entire telecom sector, its profitability and ability to invest.

There is a need to revisit the different types of taxes that have been imposed on the sector over the past years as the telecom sector cannot absorb more taxes, the source told The Jordan Times on Wednesday.

The increase in taxes harms the telecom sector and it adds to the obstacles and challenges it is facing, the source said, adding: “We are already engaged and active in corporate social responsibility-related initiatives to support the vulnerable segments of population.”

The Jordan Times could not reach government officials for a comment.