RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q3/JOR/5
8 May 2002
(02-2601)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies to Questions Posed by AUSTRALIA1, JAPAN2, SWITZERLAND3
and the UNITED STATES4 Regarding the Notification of JORDAN5
The following communication, dated 30 April 2002, has been received from the Permanent
Mission of the Hashemite Kingdom of Jordan.
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QUESTIONS FROM AUSTRALIA
Q1. Could Jordan provide details on the programme for which it is seeking an extension in
the format specified in document G/SCM/6?  What  are the criteria for qualifying for the profit
tax exemption?  How is it determined whether the exemption is partial or total?
Reply
The programme for which Jordan is seeking an extension is the exemption of the export
profits from income tax authorized by the Income Tax Law No. 57 of 1985 and its Amendments
(Decision No. 3394 of 1994 pursuant to the Law) wh ich takes the form of partial and total exemption
from income tax of profits generated from exports.  The criterion which is implemented by Jordan isto exempt industrial companies that are presenting official documents to the income tax department
verifying the amount of profit resulting from their export activities.  The amount of exemption is
therefore determined according to the imputed percentage of net profits resulting from export
activities.  Large enterprises exporting phosphate, potash and fertilizers, that account for about 70 per
cent of the country's exports are not entitled to be beneficiaries from this programme.
                                                     
1 G/SCM/Q3/JOR/2
2 G/SCM/Q3/JOR/3
3 G/SCM/Q3/JOR/1
4 G/SCM/Q3/JOR/4
5 G/SCM/N/74/JOR, G/SCM/N/71/JOR.G/SCM/Q3/JOR/5
Page 2
Q2. Could Jordan advise when and how it will phase out this programme?
Reply
Jordan is planning to phase out this programme at the end of the extension period to be
considered by the Committee.
QUESTIONS FROM JAPAN
Income Tax Law Number 57 of 1985
Q. Japan understands that Jordan pledged the elimination of this programme by
31 December 2002 (see WT/ACC/JOR/33, WT/MIN(99) /9:  paragraphs 125-126).  Could Jordan
please explain its justification in light of its pledge?
QUESTIONS FROM SWITZERLAND
Q. Switzerland understands that Jordan had taken appropriate legal measures to eliminate
the export subsidies granted by the Income Tax Law No. 57 of 1985 and its amendments in
accordance with its accession protocol to the WTO (cf. §125, 126 and 248 in WT/ACC/JOR/33).Jordan is urged to explain further the economic and development needs for this request of
extension.
Reply
As Jordan made it clear in its official request6, this extension is very necessary and important
to ensure a stable performance of the industrial sector, especially in light of Jordan's economic and
development needs.  When Jordan joined the WTO in 2000, commitments were made in light of the
economic and political situation in the region that was stable and promising with the momentum
gained through the peace process.  Jordan hoped that its membership in the WTO and the progressive
trade liberalization achieved in addition to the reforms in other trade-related aspects will induce
investments while having minor challenges to its local industries.
In the aftermath of membership to the WTO, the performance of Jordan's economy was
affected negatively by the consequences of events in the Middle East region that hindered the peace
process.  The business and investment prospects were shadowed by the continuous violence in the
Middle East in addition to the tremendous recession that hit its tourism sector.  The outcome of suchdevelopments was reflected in a slower activity of the small and medium enterprises that are already
facing mounting competitive pressures as a result of  the trade liberalization after joining the WTO,
and signing a number of free trade agreements.
The programme was established back in 1995 exempting profits gained from exporting
activities trying to compensate the harmful effects of the economical and social factors that affected
Jordan by opening up the economy.  98 per cent of the Jordanian exporting industrial companies that
are mostly of small nature suffer from the lack of market accessibility caused by their small size, that
obstruct them from reaching economies of scale, leaving their costs higher, and deprive them from
having opportunities to compete in world markets.  The shallow amount of subsidies granted forexporting companies through the current programme as appeared in the attached table, still represents
                                                     
6 G/SCM/N/74/JORG/SCM/Q3/JOR/5
Page 3
a necessary support to help the exporting enterprises to overcome the economic disadvantages caused
by the size of the local market, and the difficulties raised by regional developments.
Finally, by comparing the total amount of exem ption (US$8.9 m.) with the size of national
exports (US$1.7 b.), the total exemption constitutes 0.52 per cent.  This meagre amount is due to the
fact that the exemption is applied only to one-t hird of the country's exports (US$593.6 m.) after
excluding exports to protocol countries and of larg e enterprises that account for about two-thirds of
total exports.
QUESTIONS FROM THE UNITED STATES
Income Tax Law No. 57 B Exemption from Income Tax
Q1. Please provide greater detail regarding th e nature of these programmes in accordance
with G/SCM/39 and G/SCM/6.
Reply
The programme for which Jordan is seeking an extension is the exemption of the export
profits from income tax authorized by the Income Tax Law No. 57 of 1985 and its Amendments
(Decision No. 3394 of 1994 pursuant to the Law) wh ich takes the form of partial and total exemption
from income tax of profits generated from exports.  The criterion which is implemented by Jordan is
to exempt industrial companies that are presenting official documents to the income tax department
verifying the amount of profit resulting from their export activities.  The amount of exemption is
therefore determined according to the imputed percentage of net profits resulting from export
activities.  Large enterprises exporting phosphate, potash and fertilizers, that account for about 70 percent of the country's exports are not entitled to be beneficiaries from this programme.
Q2. Could Jordan please explain whether this  programme provides any other incentives
apart from the full or partial exemption from income tax on profits from exports?
Reply
The only other export subsidy programme that Jordan still maintains is the discount facility
below the going interest rate for commercial docu ments operated by the Central Bank of Jordan as
mentioned in the working party report on the Accession of Jordan (WT/ACC/JOR/33) paragraphs
125-126.  Jordan confirms that it is committed to eliminate this programme by 31 December 2002 as
noted in the document mentioned above, and confirms that no other export subsidy programme ismaintained.
Q3. What are the specific criteria that must be met to qualify for benefits under this
programme?  Are benefits contingent upon the use of domestic rather than imported goods?
Reply
The criteria mentioned in our reply to the first request is of a broad nature based on export
performance to non-protocol countries and does not favour the use of domestic rather than imported
goods.G/SCM/Q3/JOR/5
Page 4
Q4. Please provide the normal income ta x rates companies would pay absent this
programme.
Reply
The Normal Income Tax which will be paid in the absence of the programme is on average
15 per cent or less on the profits generated from all their operations irrespective of the nature of their
sales.
Finally, by comparing the total amount of exem ption (US$8.9 m.) with the size of national
exports (US$1.7 b.), the total exemption constitutes 0.52 per cent.  This meagre amount is due to the
fact that the exemption is applied only to one-t hird of the country's exports (US$593.6 m.) after
excluding exports to protocol countries and of larg e enterprises that accoun t for about two-thirds of
total exports.G/SCM/Q3/JOR/5
Page 5Table 1 - Income Tax Relief by HS Chapters in US$ for 2001
Jordan
Chapters Item Exports
valueNo. of
exportersIncome tax
reliefRelief per
exporterShare from
total
exportsNo. of
exporters as
% from
total
exporters
1-5 Live animals;  Animal products 5,218,732 61 78,281 1,283 0.9% 1.9%
6-14 Vegetable products 2,280,430 154 34,206 222 0.4% 4.8%
15 Animal or vegetable fats and oils and their cleavage products;  Prepared edible fats;
Animal or vegetable waxes1,564,091 27 23,461 869 0.3% 0.8%
16-24 Prepared foodstuffs;  Beverages, spirits and vinegar;  Tob acco and manufactured tobacco
substitutes22,420,887 274 336,313 1,227 3.8% 8.5%
25-27 Mineral products 72,660,924 99 1,089,914 11,009 12.2% 3.1%
28-38 Products of the chemical or allied in dustries 262,516,419 627 3,937,746 6,280 44.2% 19.4%
39-40 Plastics and articles thereof;  Rubber and articles thereof 17,386,955 321 260,804 812 2.9% 9.9%
41-43 Raw hides and skins, leather, furskins and articles thereof;  Saddlery and harness;  Travel
goods, handbags and similar containers;  Articles of animal gut (other than silk-worm gut)444,863 18 6,673 371 0.1% 0.6%
44-46 Wood and articles of wood;  Wood charcoal;  Cork and articles of cork;  Manufacturers of
straw, of esparto or of other plaiting materials;  Basketware and wickerwork186,399 26 2,796 108 0.0% 0.8%
47-49 Pulp of wood or of other fibrous cellulosic material;  Recovered (waste and scrap) paper
and paperboard;  Paper and paperboard and articles thereof23,159,357 217 347,390 1,601 3.9% 6.7%
50-63 Textiles and textile articles 25,895,318 433 388,430 897 4.4% 13.4%
64-67 Footwear, headgear, umbrellas, sun umbrellas, walking-sticks, seat-sticks, whips, riding-
crops and parts thereof;  Prepared feathers and articles made therewith;  Artificial flowers;
Articles of human hair1,310,101 41 19,652 479 0.2% 1.3%
68-70 Articles of stone, plaster, cement, asbestos, mica or similar materials;  Ceramic products;
Glass and glassware1,788,985 92 26,835 292 0.3% 2.8%
71 Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad
with precious metal and articles thereof;  Imitation jewelry;  Coin4,872,460 14 73,087 5,220 0.8% 0.4%
72-83 Base metals and articles of base metal 16,668,622 273 250,029 916 2.8% 8.4%
84-85 Machinery and mechanical appliances;  electrical equipment;  Parts thereof;  Sound
recorders and reproducers, television image and sound recorders and reproducers, and partsand accessories of such articles23,405,235 240 351,079 1,463 3.9% 7.4%
86-89 Vehicles, aircraft, vessels and associated transport equipment 109,723,888 50 1,645,858 32,917 18.5% 1.5%
90-92 Optical, photographic, cinematographic, measuring, checking, precision, medical or
surgical instruments and apparatus;  Clocks a nd watches;  musical instruments;  Parts and
accessories thereof375,598 16 5,634 352 0.1% 0.5%
94-96 Miscellaneous manufactured articles 1,660,625 249 24,909 100 0.3% 7.7%
97 Works of art, collectors' pieces and antiques 24,698 6 370 62 0.004% 0.2%
TOTAL 593,564,589 3,238 8,903,468 2,750 100% 100%
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