Mail my package, please (16 July 2023)

A recent flurry of complaints has surfaced yet again about the spread of mail orders and the eased customs regulations on packages valued at less than JD200, placing customs fees/taxes at JD5–10 per package. The attack on mail orders has focused on the losses to the importing merchants as customers choose to purchase through mail orders.

However, the arguments used are not only remiss but also one-sided and lack comprehensiveness.

Retailers in Jordan complain that such a practice, allowing packages of mail-order purchases to enter the Kingdom at such a small fee, is harmful to them and the government budget (they claim that the government loses out on what can be more revenue in customs). Hence, they are asking for a revision of current regulations. Additionally, they claim that those who purchase through mail-ordered packages risk being sold fake products and will suffer from being unable to return the items.

The claim regarding the budget is meant to urge the government to tax the mail parcels further. Such an argument is bogus as it is unlikely that the government would generate any revenue if it were to depart from the current regulation and go into over-taxation. Simply put, people would stop buying through the mail, and the government would lose the revenue it currently generates from the current 1.1 million mail parcels per year.

Also, it is well established in the economic literature that if a tax rate is doubled, its deadweight loss (the overall economic loss in an economy caused by a new tax on a product) will quadruple. In other words, the excess burden on the economy (buyers and sellers) will increase faster than revenue increases. It is, therefore, important when suggesting policy changes to consider not only the change in government revenue a tax increase would cause but also the increased deadweight loss the tax increase would perpetuate.

Furthermore, many of those that use mail orders from overseas are guaranteed the authenticity of the products (while some stores in Jordan offer fakes unbeknown to the buyers) and are offered return policies, including money-back guarantees that are not commonly available in the retail stores in Jordan.

Moreover, people who order goods via mail seek alternatives, the newest or modern varieties, and options that may be available outside the Jordanian market. Most Jordanian retailers do not turn over their products quickly and keep displaying old merchandise. One reason for this is the excessive taxation paid on such products. Hence, buyers would not purchase the offered retail product because it is not what they want. A policy such as raising tax that limits their choices is a lazy and blunt instrument, to say the least.

The real problem that retailers suffer from when it comes to imports is not mail parcels but the high and numerous taxes and fees. Jordanians pay 121 types of taxes and fees. Look, for example, at some of the taxes that importers face: Tariff tax, unified additional tax, general sales tax, fines, deposits, and insurance, fees for combustible materials, payments to revitalize tobacco cultivation, rewards, and endeavours, universities, and municipalities, subsidy fees for agricultural products, other department fees, veterinary fees, passport fees, livestock census fees, stamp fees, fees for displaying cinematic film, overload fines, walking fees, road tolls, drawing paintings of Jordanian products, inspection fee, additional tax, social affairs tax, insurance for Al-Hussein City for Youth, insurance for the Directorate of Civil Aviation, taxes for municipalities,  taxes for universities, additional tax, and import fees.

Such a baffling and innovative array of taxes fees can best be described as a comedy of compiled errors. Can you imagine what a dilemma tax compliance is for importers? Also, they have to pay the import duties and fees whether they end up selling the product, which explains why retailer turnover of goods is extremely low. 

Alas, the creativity of the legislature and executive branches of government in the search for a fistful of dinars and a few dinars more is genuinely baffling. Instead of restricting people’s choices as a policy response, let’s lower the taxes and fees, which is where the problem lies. It is not the fault of people that they decide to maximize their own choices and utilities; and it is not a bad that foreign producers and shippers are mass customizing and shipping efficiently; in developed countries where customs duties and fees are low, governments hardly ever face such a complaint about mail orders.

Published on Jordan news:

https://www.jordannews.jo/Section-36/Opinion/Mail-my-package-please-29756