The free zone and tax justice

Some economic sectors in Jordan need deep and bold reforms, after practical experience revealed legislative and implementation shortcomings that have cost the state revenues that should have entered the public treasury, at a time when public finances need every dinar to fund essential expenditures and expand development spending.

The Zarqa Free Zone stands out as one of the issues requiring serious review, not to undermine its economic role or abolish the incentives established for it, but to reorganise its activities in a way that fulfils the primary purpose of its existence and prevents the privileges granted to it from becoming a tool for unfair competition with traders operating in the domestic market.

The free zone was originally established to serve as a hub for foreign trade, transit and re-export, facilitating the movement of goods to regional and international markets. However, the expansion of sales into the domestic market, taking advantage of the exemptions and incentives granted to free zones, raises fundamental questions about tax justice and equal opportunities among taxpayers.

The car trade is the most prominent example of this imbalance. Estimates in circulation indicate that approximately 200,000 cars entered the domestic market over four years through free-zone traders, generating profits exceeding half a billion dinars, while the Treasury incurred estimated tax losses of more than 100 million dinars. These estimates require verification of their details and the basis on which they were calculated.

The problem here is not limited to competition. It also concerns the unequal tax treatment of traders engaged in the same activity and selling to the same Jordanian consumer. While traders operating within the Kingdom bear the taxes and fees arising from their activities under the legislation in force, their competitors may benefit from privileges and exemptions originally designed to serve a different type of activity. This gives them a pricing advantage and undermines the rules of fair competition.

A sound, competitive economy cannot be built when taxpayers are treated unequally, or when exemptions intended to encourage exports and transit are allowed to become a means of generating profits from the domestic market without collecting the revenues legally due.

What is needed now is a review of the legislation governing free zones and the correction of loopholes that allow exempt activities to overlap with domestic trade. This would ensure that sales to the local market are subject to the legally prescribed tax treatment, on an equal footing with other traders, while preserving the incentives necessary for exports, re-exports and transit.

Genuine reform does not mean abolishing economic privileges, but directing them towards their proper objectives. Tax justice is not merely a demand of the Treasury; it is also an essential condition for protecting competition, investment and the organised commercial sector.

Investment incentives must not become loopholes that drain public revenues and give one group of taxpayers an advantage over another. The broader the scope of tax justice, the greater the state’s ability to collect the revenues it is entitled to, the stronger public confidence in legislation becomes, and the more competition is based on genuine efficiency rather than unequal privileges.