Jordan .. How did the oil tax hinder low prices?

Ayman Fadilat-Amman

Samer Mahfouz, a forty-year public taxi driver, has long suffered from the high prices of petroleum products in Jordan - especially gasoline - while working on the car.

Mahfouz told Al Jazeera Net, "I was going back to my house after fourteen hours working on the taxi for ten dinars ($ 14). For the entire period of work I work at 70 dinars (a hundred dollars) distributed between gasoline, the taxi guarantee and some repairs."

He added that the prices of gasoline "Octane 90" are very high in Amman, and we do not feel the decline in oil prices globally, because the major collapse that affected oil prices globally is not matched by a significant decrease in fuel prices in the Kingdom.

The value of the tax is
a reflection of the large decrease in the prices of a barrel of oil globally, which the Jordanian consumer does not feel due to - according to experts - the tax rate imposed on the various types of oil derivatives.

In a simple calculation, the price of the 90-octane gasoline plate before tax in Jordan is 3.6 dinars (five dollars), and after tax is 7.4 dinars (ten dollars), to be sold to the consumer at 11 dinars (15.5 dollars).

According to Ministry of Energy figures, the tax on gasoline "90 octane" is 37 piasters per liter, at the rate of 7 dinars (ten dollars) on a 20-liter plate, while the tax on gasoline "Octane 95" is 57.5 piasters per liter, 11.6 One dinar ($ 16.3) on a 20-liter plate, while the tax on diesel and gas is 16.5 piasters and a half per liter, at 3.4 dinars ($ 4.7) on a 20-liter plate.

According to experts, the tax on hydrocarbons was direct, increasing and decreasing with international oil prices, and when it was converted to a flat rate, this prevented a significant decrease in fuel prices in Jordan.

According to them, the rise in oil derivatives adversely affects the various economic sectors, especially industrial, commercial and agricultural ones, which in turn leads to higher electricity prices.

The tax is a protection for the consumer.
On its part, the Jordanian Ministry of Energy monitors global oil prices throughout the month. The Ministry’s Oil Derivatives Pricing Committee issues a monthly bulletin of oil derivatives prices according to international prices up or down, in addition to the tax rate.

Over the four months from February to May this year, the prices of oil derivatives witnessed a successive decline, but it remained shy and had no tangible impact compared to the size of the collapse of oil prices in world markets, which necessitated a stronger decline.

For her part, Amani Al-Azzam, Secretary General of the Ministry of Energy, chairwoman of the island's oil derivative pricing committee, said that the adoption of the principle of a special tax has begun mid-last year, as this tax was determined by a certain amount for each type of oil derivative.

Al-Azzam continued that the relative taxes (public and private sales tax) and all fees and allowances that were imposed on oil derivatives were collected in one single flat tax specified with a specific number.

She pointed out that the aim of this measure is to protect the consumer from the impact of high tax values ​​on the composition of domestic prices when global oil prices rise, and to stabilize government revenues from taxes imposed on oil derivatives that are part of the state budget, and are supplied entirely to the treasury to cover part of government expenditures .

Five times the price
, in turn, the oil expert, Amer Al-Shobaki, told Al-Jazeera Net that the tax on oil derivatives represents five times the real price of oil derivatives sold to the consumer in Jordan. For example, a type of 90-liter gasoline tank with a capacity of 20 liters reaches the port of Aqaba at the price of two dinars ($ 2.8) before distributing it to Gas stations for sale to consumers.

Al-Shobaki added that the same plate is purchased by the consumer at 11 dinars (15 dollars), meaning that the consumer pays nine dinars (12 dollars) in taxes on every 90 petrol plate he buys from gas stations.

He stressed the need to review the tax rate imposed on oil derivatives in Jordan if the official authorities wanted to reduce the cost of energy to various economic sectors and consumers and to stimulate and attract investment.

Revenues for the Kingdom’s treasury from oil derivatives tax during the past year 2019 recorded 1.5 billion dinars (2.1 billion dollars), according to Al-Shobaki.

The Kingdom's monthly consumption of oil derivatives is estimated at about 140,000 barrels per month, which it imports from Saudi Arabia and Iraq at reduced prices ranging from 10 to 16 dollars per barrel from the world price.

The King of Jordan, Abdullah II, directed his country's government to enhance the strategic stock of oil derivatives, and to benefit from the current global price drop, while maintaining the provision of various sectors with all their oil derivative needs.