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Chapter - 11
Jordan

1.    Introduction

1.1.    In the Jordanian Constitution, articles 111 and 115 authorize the government to levy and collect taxes and other revenues in order to perform its duties. Article 111 dictates that taxes whether direct or indirect are to be raised only by law. Taxes should be assessed on the basis of fair participation of citizens, and should not exceed the ability of citizens to pay or the need of the state for resources. On the other hand, article 115 stipulates that all revenues should be transferred to the General Fund and not be expended unless authorised by law.

1.2.    One interesting feature of the above articles is that such revenues as fees received in return for services rendered by government or for private use of public property are excepted from the definition of taxes. In this term, there is no clear definition of taxes. However, a combination of different definitions provided by the constitution and other related laws will lead to the following: taxes are compulsory payment made by citizens and other taxpayers to the government in order to provide the resources to the government to perform its duties.

1.3.    Public revenues in Jordan are divided into three major items: local revenues represented as: taxes on income and profits, customs duties, value added taxes, other taxes, licenses, fees, postage, telegraph and telephone, interests and profits, refunded interests and varied revenues, external revenues as financial grants and technical grants for financing development projects, and, finally, refundable loans premiums. The following table represents the major items of public revenues in Jordan for the years 1992, 1993, 1994, and 1995 along with the corespondent percentage of GDP.

Table - 1
The Different Dimensions of Public Revenues in Jordan ( Exchange rate for different currencies vis-a-vis the US $ as on 31sl March, 1997 are indicated in Appendix 1 (Pg. 475)) In Jordanian Dinars (Millions) 1992- 1995

*    Source : The Closing Account for the fiscal year 1995, The Central Bank Bulletin, Vol. 33 No. 5, May, 1997.

1.4.    From the above table, some major features of public revenues structure in Jordan could be concluded as follows :

• The major direct tax is income tax that includes tax on profits of corporations, partnership and individual's income. However, it does not include any capital gains tax.
• Other taxes consist of tax on sale of land and real estate and other indirect taxes.
• Major trade taxes such as customs duties and value added tax was introduced only in 1994 to replace the consumption tax that used to be included in other taxes category before 1994.
• Other revenues come from the ordinary activities of the government which include licenses, fees, postage, interest and varied revenues.
• The remaining items of public revenues are mainly financial grants and related accounts.

1.5.    Consequently, public revenues that are classified as taxes, other revenues, and financial grants are shown in the following table with their percentage of total revenues :

Table - 2
Items of Public Revenues in Jordanian Dinars (Millions) 1992 -1995

1.6    In Jordan, taxes are classified under two categories i.e. direct and indirect. The generally accepted principle of distinction between the two categories is that direct tax is one that cannot be shifted by the taxpayer to somebody else while all other taxes are considered as indirect. As a developing country, the following table demonstrates the two kinds of taxation (1992- 1993).

2.    Audit Mandate

2.1.    The Audit Bureau Law No. 28 for the year 1952 provided in a number of articles the basis for revenue audit. As per article 8, the Bureau shall be responsible for:

1. auditing the assessments of taxes, duties and other taxes to ascertain whether the estimation and assessments were carried out in compliance with laws and regulations.
2. auditing the transactions of the Estate lands and property sale, entrust and rent of government lands and property.
3. auditing the collections of different revenues to ascertain whether they were collected in time and in accordance with the relevant laws and regulations; whether the "Law of Collecting Government Funds" has been applied on taxpayers who have failed to pay their liabilities and whether collected monies were paid to the Treasury and posted to the proper heads and items of the General Budget.
4. auditing the transactions of write offs and exemptions to ascertain that they were only made in compliance with effective laws and regulations.

2.2.    In addition to the above audit mandate that regulates the performance of Bureau in this regard, the Head of the Bureau, as provided in other articles of the Bureau Law, or any official delegated by him, if he deems necessary, may audit any voucher or other documents which are not stated above. He is also entitled to have access to all fiscal and accounting transactions at any stage, whether such transactions be of general revenue or expenditure. He may call upon or correspond directly with the accounting officers who are in charge of these accounts.

2.3.    On the basis of the above mentioned articles, the Bureau has been given the authority to audit revenues with unlimited access to assessments and records. However, the legislative power given to the Audit Bureau is not the only factor that audit needs in order to perform satisfactorily. In the light of lack of resources, there is a big need for more financial resources to perform the audits efficiently and effectively. In this respect, training the audit staff to fulfill the required mission in better ways is an essential step that has to be considered, in addition to recruiting qualified auditors as a further privilege.

2.4.    Since the Audit Bureau is placed within the Government structure and since it reports to the Prime Minister, the Bureau could not overcome the government's barriers imposed on public entities. Working according to the Civil Services Act and performing in the light of the corrective actions set by the government and other state procedures, hinder the Bureau's performance in field of auditing revenues. As a result the Bureau is in need of administrative and financial independence.

2.5.    As a step towards achieving the last mentioned goals and to overcome all limitations and constraints confronting the Bureau, the Bureau sought approval for the amendment of the Bureau's Law No. 28 for the year 1952 which was submitted to the Prime Minister on the 19th of March 1996 by a special committee formed by the Minister of Administrative Development. This Committee was established to study the draft law set by the Audit Bureau and to make recommendations included in this regard according to the Parliament Financial Committee Resolution No. 7/1995. The Law bill contains :-

1. Immunity of the President of the Audit Bureau in accordance with article 119 of the Jordanian Constitution.
2. Administrative and Financial Independence.
3. Expanding the audit scope to include value-for-money audit.
4. Auditing public enterprises, state-shared companies in not less than 25%, of equity and other entities which are regarded as public funds in law.

2.6.    Furthermore, the Audit Bureau in its Annual Report 1991 recommended the establishment of internal control in each government entity in order to ascertain whether the entity's work was conducted in pursuance to laws, regulations and instructions. As a result, the Government represented by the Prime Minister held a workshop attended by the relevant ministries and departments to consider the suggestions and recommendations of the Bureau. The Workshop recommended that the Bureau's suggestion be implemented. Despite implementation of the recommendation, these internal units were not able to achieve the objectives. In view of this weakness, the Bureau's audit teams have to continue to conduct all audits related to financial transactions. In addition, the Bureau has to check these units and conduct compliance and substantial tests and has to increase auditing samples which require more time and effort.

3.    Audit Procedures And Methodologies

3.1.    Public revenues are the main source of income to cover public expenditures. Government pays great attention to public revenues audit to ascertain soundness of revenue estimation, collection and remittance into the Treasury.

3.2.    Audit Teams are deployed in revenue departments where revenues are assessed and collected and also to examine systems and procedures. In this regard, the Audit Bureau of Jordan constantly provides training to the audit team located in Income Tax Department and other auditors concerned on the duties and responsibilities prescribed in this field using special audit techniques as a step towards preventing and detecting departures from approved procedures. Monthly, quarterly and annual plans of audits are prepared by the Head of the team to regulate work procedures and to establish methodologies to be used to perform the audit in an efficient and effective manner according to provisions of the Income Tax Law No. 57 for the year 1985 and their amendments.

3.3.    In this respect, control stage of revenue realization, collection, and remittance into the Treasury, and the verification of revenue receipts used by the Audit Bureau of Jordan are as follows :-

• verifying that legal basis is provided to impose revenues.
• controlling revenue by direct collection, attachment on source, and revenue stamps.
• controlling refunds of revenue and exemptions and verifying their legality.
• controlling payments into the Treasury of revenues collected directly, by attachment on the source and collection from stamps.
• verifying soundness of records of receipt and stamps.

3.4.    Due to staff constraints, not all taxpayer's files are audited. Samples are chosen after reviewed by the audit team and on the basis of experience. Audit findings are reported to the Headquarters and presented using reporting tools (refer to paragraph 5). The Bureau conducts quality control checks to ensure soundness, reliability and validity of data. Upon the completion of this process, the audit manager follows up on the work of audit teams through field visits in order to review work progress and to check some files already audited by the audit team. For example, the individual's assessment files have to be authorized by the audit team before the amount of tax is imposed on the tax payer. This preventive measure proved to be effective to detect irregularities and to provide reasonable control over assessment of individual income taxes. The Head of the Team has to submit a report to the Top Management in which audit findings are included. At a later step, the Head of the Bureau, if he deems it necessary, addresses the report with recommendations to the auditee to take corrective actions. Upon the implementation or non-implementation of the Bureau's suggestions mentioned in the report, the Bureau refers to these findings in the Annual Report of the same fiscal year.

4.    Audit Planning

4.1.    The Audit Bureau management aims at optimizing the limited resources available to achieve audit objectives. However, utilization of resources should be planned to keep the audit risk at a minimum level. As one of the major components of the Bureau's structure, the Planning and Central Supervision Department (PCSD) which is responsible for preparing a central audit record - a blue print - that includes the annual financial statements of the auditee at the beginning of each fiscal year.

4.2.    At the same time the Audit Department, works constantly on developing annual plans that are to be further divided into quarterly plan and, then be sent to the Team Head to be implemented. Upon receipt of the plans, the Team Head distributes the plan among his auditors on a monthly basis. At the end of each month, auditors submit performance reports and other details of audit findings. The head of the Team in his turn submits these reports to the Audit Manager for ncecessary actions.

4.3.    The PCSD upon receiving the performance report duly adjusts the Audit Record. The Annual Audit Record is a very effective method to control performance of audit teams and evaluate the process of audit through the audit span which is one year in this case. By observing the closed accounts and the appended ones, the Bureau's management will be able to determine the areas where is not progressing as scheduled.

4.4.    Monthly, quarterly and annual plans are, as a final step, computerized to be studied and analyzed in order to identify deviations from the plans. Audit Managers are provided with reports presenting the study outcomes to be followed up by auditors in the field.

4.5.    In terms of measures adopted for minimization of audit risk, qualified human resources are distributed according to the materiality of each entity subject to audit. For example, audit teams placed in Income Tax Department, and Customs Department are selected on the basis of an appreciation of risk areas since such departments need accounts verification. Similarly, auditing by sampling is a recent method adopted to save time and effort and to provide an optimum utilization of audit resources.

4.6.    In planning audits in such areas, audit manuals/guides and worksheets have to be always modified to meet the evolving demands. Other than planning, training is another vital activity which has to be constantly improved.

5.    Audit Reporting

5.1.    All government departments subject to audit should conform to the provisions of the Audit Bureau Law, especially article 16 of the Bureau Law which requires such entities to reply to queries issued by the Bureau within a period of 30 days. This and other articles provide the legislative back up in the field of audit reporting. The hierarchy of audit reports begins with the internal audit memorandum, and proceeds to cover pre-audit list, query, and ascends to reach the final stage, that is the Annual Report submitted to the Parliament.

5.2.    The Audit Bureau prepares its Annual Report that includes the completed audits in pursuance to article 119 of the Jordanian Constitution that provides:

5.2.1.    "An audit bureau .shall be established to supervise and control state revenues, expenditures and ways of spending them :-

• the Audit Bureau submits General Report to Parliament at the beginning of each ordinary session, or as requested by the Parliament, General Reports comprise lists of audit notes findings, observations and irregularities.
• law provides the immunity of the Audit Bureau President"

5.3.    Further, paragraph (a) of article 21 of the Audit Bureau Law and its amendments reads as follows :

5.3.1.    "President of the Audit Bureau shall submit an annual report of the accounts for each fiscal year listing his observations to the Parliament, and shall provide a copy of the report to the Prime Minister and Minister of Finance. He has to include in his report observations about audited organization according to article 4 of this Law clarifying irregularities committed and consequent responsibilities thereon at the beginning of each ordinary session, or when the Parliament requires that".

5.4.    The Bureau in preparing its Report follows an analytical approach to analyze all data collected from the following resources :-

• The Final Account issued by the Ministry of Finance for the past fiscal year.
• The General Budget Report for the year of the report and the following year.
• Enterprises balance sheets for the same fiscal year and for the following year.
• Queries issued by the Audit Bureau for the year of the report.
• Letters addressed to the ministries, departments, and official public enterprises under audit.
• Capital projects reports.
• Audit observation on capital projects raised by the Bureau's audit teams.
• Follow up of previous annual reports issued, and subsequent action taken by the relevant ministries and departments.
• Credits requested from different individuals, establishments and
• foundations, amounts of money saved by the Bureau according to pre-audit of expenditures, amounts of money incurred on taxpayers,
• custom and license fees due that were realized by the Bureau's audit teams.
• Performance Auditing Studies conducted by PCSD.
• Statistics issued by the Central Bank, Amman Financial Market, and Ministry of Commerce.
• Annual Reports issued by government entities subject to audit.
• Studies and researches conducted by the Bureau.
• Ministry of Finance Records.
• Ministry of Justice Records.

5.5.    By analyzing the said data, the most important irregularities committed by the state ministries, departments and public official enterprises and the consequent responsibilities will be ascertained. In this regard, recommendations will be proposed to remedy such irregularities in light of effective laws, regulations and instructions issued for such manner. Performance analysis of ministries and departments will be studied to measure achievement rate, delays and variable orders. In addition, closing accounts of some entities will be analyzed to evaluate their performance and efficiency in achieving prescribed goals.

5.6.    The Annual Report may contain chapters on : the most important recommendations concluded by the Bureau, samples of auditing in which queries, credits requested from different individuals, establishments and foundations, amounts of money saved by the Bureau according to pre- audit of expenditures, amounts of money incurred on taxpayers, custom and license fees due are presented, in addition to pending issues, investigation and auditing committees, government actions, and procedural case actions, and issues of embezzlement, forgery, and manipulation of public funds.

5.7.    Upon completion of the Report, the Financial Committee of Parliament reviews audit findings and recommendations and discusses them with the Audit Bureau in presence of concerned government entities. Recommendations to promote the Bureau's findings are submitted to Parliament for approval to ensure that actions will be taken to correct violations, irregularities and malpractices. The Annual Report is a reflection of the Bureau's performance in areas that are probed by the Bureau.

5.8.    The Audit Bureau Law in article 21/2 allows the President of the Bureau to submit special reports concerning matters of particular significance with serious audit findings which are urgent at any time to the Parliament. In case these reports are performance-oriented, the executive entity concerned will go through these reports and discuss them with the Bureau in advance.

5.9.    In case any dispute arises between the Audit bureau and any ministry or department, issues shall be presented to the Council of Ministries for final decision. Report submitted has to include all matters that are under dispute. This point also has to be disclosed in the annual report of the Bureau for that year.

6.    Information Technology Audit Techniques

6.1.    The Audit Bureau of Jordan has updated and developed its organizational structure to keep pace with the new technology trends through the establishment of an Information Technology Section in 1989. In 1994, a specialized group for computer assisted auditing techniques was formed and a number of studies were conducted in this field.

6.2.    The following methodology was chosen to audit the computerized systems in different entities, taking into account that auditing Customs Department is in process:

• identifying automated systems used.
• studying the existing laws and regulations in effect.
• studying the mechanism of revenue collection.
• checking internal control systems.
• checking the use of emergency plans to confront any urgent matter.
• checking the environmental control.
• conducting compliance and substantial tests.
• providing the Bureau with a report including audit findings.

7.    Human Resources Management

7.1.    Human resources management is one of the main elements in the organization system, since failure or success of any department depends on its personnel. On this basis, effective management resorts to setting procedures and policies that would stimulate employees, respond to their requests, and fulfill their ambitions that would in return increase their competence, enhance their capabilities, develop their performance and increase creativity.

7.2.    In this regard, some of the human resources management regulation rules to upgrade skills and expertise of audit personnel are listed below.

• Civil Service Regulation set rules for recruiting, promoting, determining duties and responsibilities of employees, evaluating their behaviour, and placing disciplinary actions on them.
• Job Classification Regulation that is issued according to sub-laws of the SAI provides instructions to classify, and describe jobs and to place them in the entity's organizational structure.
• Recruitment policies that aim at choosing qualified persons to fill vacancies.
• Training strategy that is directed towards instilling knowledge and skills with a view to building a professional workforce which will meet the requirements for an efficient and effective service in line with the mission of the entity.
• A well-planned system of incentives that provides a social environment in which mutual cooperation, loyalty and a desire to achieve prescribed goals and intended objectives. This means fulfilling needs of employees in the manner that will motivate their technical, scientific and behavioral capabilities by placing them for serving such goals and objectives.

8.    Basic Laws Of Taxation

8.1.    The Legislation of the Audit Bureau of Jordan in respect of direct taxes are represented by the Income Tax Law No. 57 for the year 1985 and its amendments, and in respect of indirect taxes they are embodied in the Customs Law No.61 for the year 1983. The study of these Laws brought out the following essential features of the said taxation systems and the in­ built safeguards for government revenues and control mechanism system available in the laws and executive instructions flowing therefrom.

8.2.    The most essential features of this Law are as follows :

8.2.1.    Applying the unified income tax system through which all income sources are subject to one standard tax. One law is applied for one entity. This principle is different from the qualitative tax system that imposes special tax on every income source and applies thereon a special law. These taxes are classified as :-

• payments tax;
• trade and industrial profits tax;
• free professions profits tax;
• transferable values tax.

8.2.1.    It is worth mentioning that the effective unified income system is used in Jordan, Egypt, and Iraq, while the qualitative tax system is used in Syria, Morocco, Algeria, Tunisia.

8.4.    Progressive system of income tax is applied on individuals (article 17/a in the Income Tax Law), and the relative tax system on companies income. Rates of such taxes are uneven. The rate of 15% is imposed on industrial companies, mining, hotels, hospitals, transportation, and contracts in accordance with promotion of Investment Law No. 16 for the Year 1995.

8.5.    Self assessment method is followed as a basis for tax levy on all individuals.

8.6.    Objections for appeal are considered as decisions issued by assessor and are subject to objection with the judicial authority - (an independent, neutral authority aiming at achieving justice for the Treasury and taxpayers).

8.7.    In respect of the built-in safeguards for government revenues and control mechanism system available in the laws and executive instructions, the Jordanian Income Tax Law provides many safeguards for validated assessment. The following points illustrate this :-

8.7.1.    The General Manager of the Income Tax Department is entitled to perform all responsibilities and duties authorized for the assessor in pursuance to Income Tax Law provisions (article 48/b-2).

8.7.2.    The General Manager may submit all or some of the assessment decisions made by assessor or by the assessment committees, including the assessor's decision to accept the annual statement with previous instructions, to be audited by himself or by anyone from the Income Tax Department authorized by him. Assessment decisions subject to audit are not valid or mandatory unless approved as prescribed. Any deviation thereon shall be void. Any dispute arises out from auditing procedures shall be brought to the General Manager (article 48/b-4).

8.8.    Administrative objection:

8.8.1.    Article 3 I/a stipulates that "any person on whom taxes are imposed may, according to article 29 and article 30, object in writing within a period of 30 days from the date of notification."

8.9.    Judicial Objection:

8.9.1.    Article 31/c provides that: "If the assessor doesn't approve of issues included in the taxpayers objection, he may, by a decision accompanied by reasons, approve the objected assessment by decreasing or increasing the amount or cancel it. Decision issued in pursuance to this article is subject to appeal". In addition, article 31/g states that: "Taxpayer may request reasons for any judgment or order issued by court in this respect if the income tax amount estimated by the assessor or the Minister or by the authorized officer exceeds 1000 Jordanian Dinar before making set off.

8.9.2.    It is worth mentioning that the most important reasons that stipulated amending the Income Tax Law No. 57 for the year 1985 were:-

8.9.3.    Prioritizing promoting national savings at both individuals and companies levels.

8.9.4.    Directing toward supporting, and promoting investment since no capital profits taxes are levied.

8.9.5.    Cancelling tax rate schedule as means to promote investment and replacing it with reduced tax rate system on activities determined in Promotion of Investment Law.

8.9.6.    Achieving more social justice through increasing exemptions for limited income individuals.

8.9.7.    Achieving transparency in law provisions to limit discretionary power.

8.9.8.    Promoting effectiveness in self assessment and collection to preserve tax yield.

8.9.9.    Customs Law No. 16 for the year 1983 was made effective on the 3rd of October 1983. This Law is based on the provisions of the Unified Customs Law issued by the Economic Unity Council according to resolution No. 707/d/25 dated 4/6/1975 and is characterized by the followings :-

• protection through cancelling exemption granted for imported goods which are similar or identical to the local goods as stipulated in article 159 of the said Law.
• Promoting industry sector through increasing facilities given to this sector in pursuance to articles 140-151 of this Law and instructions issued thereon.
• Customs Duties Drawback Regulation was established according to this Law to provide drawback on material included in manufacturing national products for re-exportation. This process was established to support industry and promote searching for export markets to sell national products as stated in articles 145-156 of this Law.
• Establishing the principle of compensating duties other than customs tariff if goods came from country of origin with dumping prices.
• Providing the executive authority wide responsibilities to carry out necessary changes on customs tariff. On the other hand it restrains and limits the wide responsibilities given to the General Manger of Customs Department to impose penalties in the previous Law - Customs Law No. 1 for the year 1963.
• The Ministry of Finance is given wide authority in respect of imposing penalties on offences committed, as stipulated in article 239 of this Law. Sea Customs Scale was determined in article 2 of this law as regional water borders. Customs smuggling was clearly defined in this Law, in addition to providing detailed provisions of assumed smuggling crimes and a differentiation between smuggling crimes and customs offences.

9.    Landmark Judgments

9.1.    The Audit Bureau of Jordan possesses an updated and complete directory of basic laws, instructions issued thereon, and amendments in its specialized library that contains all laws, regulations, instructions, amendments issued in the Official Gazette, judicial pronouncements and interpretations issued, as requested, in special cases.

9.2.    To ensure correct application of laws in audit observations, valid legislations are kept and classified according to subjects and relevancy. Revenues are classified under main heads related to financial matters and other subject matters. Sub heads are further classified to cover all related areas of taxation, and customs, as follows :-

9.3.    Furthermore, interpretation decisions issued by the Special Tribunal that was established according to article 123 of the Jordanian constitution are also kept in the Library as well as Resolutions of Court of Cassation (Appeal) that are gathered and distributed to all auditors in field and to the concerned officers to be a reference in handling similar cases.

9.4.    Furthermore, a Legal Affairs Department has been established in the Bureau to follow up all current issues related to laws and regulations, ... etc, and to provide auditors in field with consultation. In addition, this Department handles all legal cases faced by auditors in the field arising from any dispute or disagreement or performance not in compliance with effective laws and regulations.

10.    Fiscal Reforms: Case Study on Systemic and/or Legislative Changes

10.1.    The Jordanian Audit Bureau, in its special and annual reports, continuously recommends improvement in the implementation of the Income Tax Law and the Decisions of the Court of Cassation. In addition, through the practice of auditing, the Bureau ensures that activities are done in compliance with laws and regulations.

10.2.    In 1993, the audit team attached to the Income Tax Department studied the file of X company which carry out its business in the agriculture sector. Auditors detected that payments received upon renting a land invested by the other part has to be taxable. As an outcome of audit analysis, and upon the recommendations of the Bureau, the decision No. 4 for the year 1995 was issued by the Court of concession to confirm that rent charges are subject to taxation.

11.    Tax Expenditure

11.1.    Tax expenditures take the form of exemptions, deductions, credits, reduced tax rates or tax deferrals. The Income Tax Law No. 57 for the year 1985 and amendments provide provisions for personal, family, university education and aliment exemptions, deductions, and reduction of operation expenditures. In spite of this, most taxpayers try to diminish this 'burden through two ways: a way that doesn't affect the Treasury yield of taxes which is represented by taxes shifting, consumption, and reflection, and the other one which really affects Treasury yield such as tax avoidance, fraud and evasion. The second way is the main concern here since article 42 of the Jordanian Income Tax Law provides a basis for clarifying action upon which imprisonment and fines are incurred.

11.2.    Tax evasion is defined as partial or whole taxpayer abstention from paying his tax liabilities. The Jordanian legislators did not define tax evasion in the Income Tax Law, but it included, as mentioned earlier, forms of such offence. On the Other hand, tax avoidance is the process that taxpayers derive benefit from loopholes in legislation. This action is legal, and taxpayers in this regard will not be incriminated.

11.3.    In Jordan, great consideration has been given to costing system of tax expenditure scheme, since this area is so critical. In this respect the generally accepted costing system is used. In addition, inter departmental coordination in implementation of tax expenditures scheme is effective according to article 26 of the Law which stipulates that every person with one or more income sources subject to taxation has to provide a statement including all details regarding his overall income, and taxes incurred for the last year not later than the last day of the next four months from the end of the fiscal year. Furthermore, to organize coordination between departments, article 3 of the same Law defines and classifies income sources subject to taxation, and article No. 1 in the Instruction No. 1 for the year 1989 issued in pursuance to article no. 27 of the Income Tax law No. 57 for the year 1985, obligates companies, merchants, hospitals, drug stores, contractors, investment offices, airlines offices, estate offices, press, etc to provide an income statement according to provisions stated in article 26 above.

12.    Tariff Classification And Valuation In Commodity Taxation

12.1.    In the Tariff Act of the Audit Bureau of Jordan, the classification and valuation of commodities system has been set in accordance with articles 11-16 of the Customs Law No. 16 for the year 1983. This Law applies on all imported goods in pursuance to articles 12 and 13 of the same Law. In addition, preferable tariff is imposed on some commodities according to established agreements set in this respect.

12.2.    The Customs Tariff Council that comprised of the Ministry of Trade and Industry, the Ministry of Supply, and the Ministry of Finance/Customs Department, is the arm of Customs Department in the field of recommending changes on some customs tariff items. Upon these recommendations, the Prime Ministers Council may make decisions accordingly.

12.3.    In regard of valuation of commodities for taxation, the valuation Office in the Customs Department clarified that the Customs Department has adopted the GATT definition of Valuation instead of the Brussels. The Audit Bureau of Jordan keeps an updated commodity-wise portfolio issued in the Official Gazette for the Bureau archives.

13.    Accountability

13.1.    Intra-Departmental Accountability Through Internal Control Systems

13.1.1.    Auditing helps improving internal control and internal audit systems of Revenue departments. Auditing processes and procedures are performed before implementation, after implementation and concurrently.

13.1.2.    The internal control system comprises the control environment and control procedures. It includes the policies and procedures adopted by management of an entity to assist in achieving the management's objectives of ensuring, as far as practicable, the orderly and efficient conduct of its business. In this field, internal controls established in governmental entities are concerned with achieving the following objectives as far as accounting system is concerned:-

• transactions are executed in accordance with management's general or specific orders.
• all transactions are promptly recorded in the correct amount, in the appropriate accounts and in the proper accounting period so that financial statements will be prepared in accordance with an identified financial reporting framework;
• access to asset and records is permitted only in accordance with management's authorization; and
• recorded assets are compared with the existing assets at reasonable intervals and appropriate action is taken regarding any difference.

13.1.3.    Furthermore, the permanent head of government is responsible for establishing systems of internal control to ensure the propriety, security, completeness and accuracy of departmental transactions and accounts. To help him discharge this responsibility, he will often employ an internal audit unit to examine relevant systems and procedures independently from line management.

13.2.    Legislative Accountability

13.2.1.    Audit reports are the main instruments of the legislature to ensure that all objects are achieved and operations performed in compliance with relevant rules and regulations and to ascertain that revenue departments are handling their mission efficiently, effectively and economically.

14.    Collection And Accounting

14.1.    Collection procedures are computerized in the Income Tax Department. It performs its operations both manually and through computer. Tax collection is done firstly through manual calculation using a particular sheet. These sheets, after study, are automated. Notification is issued to taxpayers and sent by mail as a result of these processes.

14.2.    In the process of tax collection, forms are processed, payments are deposited, and delinquent taxpayers are followed-up. The main elements of this process are represented by the maintenance of the current accounts, for every taxpayer. This record contains the necessary information to follow-up on the amounts due to the government or credits which are owing, receiving and processing the tax returns.

14.3.    The Audit Bureau is considering to convert manual tax processing system to a computerized system. In that stage, major problems of computerization were encountered in computer language, software and trained personnel. The problems, generally speaking, were, in addition to available maintenance service and the postal system:-

• The difficulty of securing highly qualified systems analysts, programmers, and machine operators in the number required.
• Qualified computer personnel are difficult to retain on most government salary scales.