**_Figure 15. Distribution of Households by Final Electricity Consumption Block by Market Income per Capita Decile_**<sup>**_66_**</sup>

<!-- Start of picture text --> 100<br>90<br>80<br>70<br>60<br>50<br>40<br>30<br>20<br>10<br>0<br>Household market income decile<br>1-160 161-300 301-500 501-600<br>601-750 751-1000 1001+<br>Percent<br><!-- End of picture text --> <!-- Start of picture text --> Note: Deciles of market income. The share of households per final<br>consumption block in HEIS has been adjusted to preliminary figures from<br>administrative data.<br>Source: HEIS 2017-18 and World Bank calculations.<br><!-- End of picture text --> Although PIT is the most progressive form of revenue generation and collections are particularly low in Jordan by international standards, the recent history of PIT reform suggests that efforts directed to increased compliance are more politically feasible in the short-term; in the longer-term greater reliance on direct taxation will be needed to increase public revenues in a progressive manner. Indirect taxes, however, can be simplified and significant revenue raised by eliminating GST exemptions and lower rates and unifying the sales tax rates for all items. Under this scenario, we assess the potential impact of using a unified single GST rate of 16 percent for all items.<sup>67</sup> While this raises the tax rate for some items with reduced tax rates and thus the direct impact of taxes, it also eliminates the cascading effects caused by exemptions, which were accounted for around 10 percent of the total GST collections in the baseline. Overall, this reform has only small poverty and distributional effects, increasing inequality by only 0.1 points as the increase in direct prices is offset by the decrease in prices when producers of previously GSTexempt goods and services can now claim GST on their inputs. This reform could raise an additional 5 percent of indirect taxes (about JOD 120 million), which can be used to fund progressive expenditures to compensate for the small increase in poverty (0.2 points) or to close the fiscal gap. In reality, purchases of goods at informal locations which do not charge GST mean that the impact on poverty and inequality would be even less, although so too may be the impact on revenues.<sup>68</sup> Preserving the zero-rates for some items may additionally provide relief for low-income households, but despite a potentially modest poverty mitigation effect, the fiscal cost could be great.

Finally, we assess reforms to social assistance which are currently being implemented. The current Takaful expansion is not included in the baseline of this study as it began after 2018. Also, since the programmed started after the HEIS data was collected, there is no information about beneficiaries in the survey. Thus,

> 66 This analysis is based on self-reported consumption of electricity from HEIS. This does differ from administrative NEPCO data.

> 67 Leaving STT rates (for mobile phones, sodas, alcohol and tobacco) unchanged.

> 68 This is because poor households tend to make more of their purchases in the informal non-tax paying sector than richer households (Bachas _et al._ 2020).