The Impact of Taxes on Prices and Production in Jordan

Abstract

Purpose: This study aims to demonstrate the impact of taxes on prices and production in Jordan. Theoretical framework: Study problem lies in asking the following questions Does the tax system in Jordan serve the economic aspects? Does the tax in Jordan affect the economic aspect? Is the tax in Jordan fair? Is there an impact of the tax on prices in Jordan? Is there an impact of the tax on production in Jordan? What is the effect of taxes on consumer speeding on necessary versus luxury goods? What is the impact of higher taxes on personal income of consumers? The effect of Lower taxes on the economy and disposable income? What is the alternative for governments to increase their income other than direct higher tax system? What is the effect of various government entities; such as financial, administrative, and social corruption on Jordan economy? Design/methodology/approach: Researchers used standard analysis method and vector error correction model for the period (2011-2020), and used the profit margin ratio indicator as a representative indicator for production and prices. Findings: Results showed a long-term causal relationship between prices and production; from one side and direct and indirect taxes; from the other side and that relationship between short-term deviations and long-term reliability is corrected at a rate of (3%) per year. Results showed a negative significant impact of indirect taxes on price competitiveness; in the long term which was reinforced by the variance components’ analysis and response function’s test. Results also showed an insignificant impact of direct and indirect taxes on price competitiveness; in the short term. Research, Practical & Social implications: Demonstrating the impact of taxes on prices and production in Jordan. As well as, discussing the governmental tax and income. Originality/value: The importance of study stems from research topic, since taxes have multiple effects on various areas in society which can be divided into scientific and practical importance.