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Jordanian PC dealers suffer over tax uncertainty

Fear a continued slump in business until a government ruling on the exemption of computers from sales taxation is decided

PC resellers in Jordan fear a continued slump in business until a government ruling on the exemption of computers from sales taxation is decided.

The Jordanian Ministry of ICT recently revealed that it could scrap the 16% sales tariff levied on PCs as part of efforts to raise the number of PC owners and home internet users.

While local IT dealers have welcomed the long-term implications of such a move, uncertainty over whether the tax-break will be implemented has led customers to delay PC purchases in the meantime.

“Since it was announced last month that there might be a law which will remove tax on computers, sales have dropped almost 90%,” lamented Mamoun Zater, general manager at Amman-based retail chain PC Zone. “Everybody is waiting — we have had customers come to our front door and ask, ‘have you removed the tax or not?’ The situation now is very bad, although if the law is signed it will be good for the market.”

Other retailers also confirmed they had seen a sharp decline in sales of PCs and notebooks during the past month as customers wait to see if the ruling will mean they can buy the same products at lower prices.

One IT trader claimed that unless the situation is clarified soon, some retailers could be forced to close down as the channel was already encountering difficult market conditions anyway.

“Announcing that the tax might be removed was not a smart move,” agreed Khaldoun Borini, general manager at ISS Trading. “We should have woken up and read in the newspaper that it had been exempted once it was definite — that would have been the best way to do it because sales are now slowing.”

Concerns of an inventory build-up in the Jordanian channel are also mounting as a result of the current scenario, while sources say there is a danger that resellers that can’t shift the stock they have taken may be unable to fulfil credit terms.

The market is now waiting for the Ministry of ICT to make a decision on the tax exemption and clarify the situation, with some believing that could happen in the next few weeks.

Channel players are eager for a positive outcome, insisting that the removal of the 16% duty would boost local PC consumption and encourage higher in-country sales.

“This will allow more of the middle class to afford notebooks and desktops, and that is the major objective — to increase computer usage in Jordan,” said Safwan Kakish, chairman at Samsung dealer Compute. “I think that goal would be achieved easily if [sales tax exemption] is implemented.”

Other resellers believe that cancelling the tax could make Jordan more attractive to re-export buyers from markets such as Iraq, Lebanon and Syria, while also rendering the grey market less compelling for local PC importers.

“There has definitely been a motivation for somebody to go to Dubai and buy laptops — even for personal use — because of the 16% sales tax in Jordan. This would now mean we would be able to be cheaper than Dubai in computers,” commented Mohammed Daleh, managing director at reseller SCS.

Borini at ISS is also hopeful that the ruling will go through, claiming it will stimulate demand and level the playing field for local dealers and retailers. “If the price bracket is lowered by 16% you can target more customers,” he said. “It also reduces the smuggling effect because there are many people who buy and sell without invoicing. This will open up another market.”

According to newspaper reports in Jordan this week, government officials say no final decision has yet been taken on whether the tax will be removed and the issue remains under consideration.

The Jordanian Ministry of Information and Communications Technology could not be reached for comment.