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Fiscal Reform in Jordan

2006-2009 || U.S. Agency for International Development

Abstract

This project assisted the Government of Jordan in achieving its fiscal goals, as defined in the Jordan National Agenda reform plan, by improving the efficiency and effectiveness of the fiscal system over a period of three years. With the Ministry of Finance (MOF) as its chief counterpart, Deloitte advisors provided technical assistance to Jordan in the area of fiscal policy, focusing on tax policy, tax administration and budget management.

The Challenge

At the start of the project, the tax policy in Jordan discouraged economic growth by taxing some transactions at very high rates. Not only did this raise barriers to new and expanding business, but it also fell short of raising sufficient revenue because of its narrow base. The tax policy had little chance to be improved as the MOF had little capacity to analyze tax policy. Tax administration was poorly organized and audits were ineffective. Budgets focused only on inputs with no attempt to measure results. The Government accounting was conducted on many unconnected and antiquated systems.

How We Helped

Tax Policy: Deloitte worked with MOF counterparts to develop a modern tax code to promote growth and increase equity. This legislation was based on the results of an assessment of current taxes and an in-depth quantitative analysis of the potential impact that various tax policy changes would have on revenues, the economy, and overall economic development in Jordan. This analysis was done by Deloitte advisors in tandem with the newly established Tax Policy Unit that we helped train.

Tax Administration: Our team trained staff in modern techniques, introduced an internal control capability, re-engineered tax workflows, expanded the online tax filing system, assisted the MOF in designing a public taxpayer education campaign, and supported the development of an efficient and cost-effective small taxpayer strategy.

Budget Management: Deloitte advisors implemented a results oriented budget system. Project team members completed the budget classification system, established a commitment control system, designed and implemented a unified government accounting system, trained Budget Department and other ministry staff and drafted an Organic Budget Law. The Fiscal Advisors also designed a new Government Financial Management Information System and established a temporary office to manage its implementation.

Solution

At the end of the project, the Government was near adopting a modern tax code that could promote growth and increase equity. Tax collections increased dramatically as efforts were automated and procedures streamlined. Budgets were compared to results to enable better resource allocation. An integrated Government Financial Management Information System was being implemented to monitor and control government revenue and spending.

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