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Jordanian IT companies protest tax hike

Tax rise and high electricity costs could force companies to locate elsewhere

Jordan's IT industry may be under threat from rising costs of doing business in the Kingdom.
Jordan's IT industry may be under threat from rising costs of doing business in the Kingdom.

Companies in Jordan's IT sector are warning that a proposed income tax increase, coupled with a recent rise in the cost of electricity, could spell the end for the sector in the region.

The country has a flourishing IT industry, particularly in software development and outsourcing, but a proposed raise in income tax rates, from 14% to 25% may make operating in Jordan uneconomical, leading to companies shifting operations to other territories.

Jordan's IT industry generated revenues of $738 million in 2011.

Speaking at a recent industry summit to discuss the situation, Fadi Qutaishat, vice president for sales and marketing at telecom solutions provider Globitel described the situation as "worrying and intolerable" according to local news reports.

"The solution will be for all IT companies to act together and move their offices from Jordan to avoid the possible increase in income tax and other rising costs. If the income tax law is endorsed, we should move outside Jordan," Qutaishat said.

This month, the government of Jordan has also doubled taxes on mobile phone calls and handsets, with some in the telecoms industry claiming it was being seen as a cash cow to make up budget shortfalls.

Abed Shamlawi, CEO of the ICT Association of Jordan (Intaj), said that some local companies were considering leaving the country.

"The uncertainty in the sector, the repeated changes to the income tax law, the proposed tax increase and the recent rise in power prices are all hindrances to the sector, which contributes about 14% to the gross domestic product annually. The situation is serious... There is no strategic planning in general for improving the business environment and this will turn investors away."