It is widely understood among economists that taxes are the primary source of government revenue, accounting for a substantial portion of this year’s budget. Yet it is equally clear that excessive taxation can suppress spending and hinder economic activity. When tax rates exceed the optimal level, revenue may decline instead of rise, and the economy may slide into stagnation.

 

Recognizing this, the government under Prime Minister Dr. Jaafar Hassan has adopted a balanced economic approach that moves beyond the conventional focus on reducing fiscal deficits. Rather than relying solely on cuts and collections, the government is shifting toward a growth oriented strategy that aims to boost confidence in the business environment and promote sustainable economic expansion. This philosophy aligns with the goals of ongoing economic reform programs supported by the IMF and takes into account local constraints such as fiscal deficits, high public debt, low growth, and rising unemployment.

 

One of the most notable recent policy decisions was the overhaul of the vehicle taxation system. The government approved amendments that significantly reduced overall taxes on vehicles. This move is not only expected to ease the financial burden on citizens but also to stimulate activity in the automotive market and address long-standing distortions in the sector.

 

However, this decision is part of a broader, coordinated set of measures aimed at reviving economic momentum. In the housing sector, the government introduced a 50% reduction in registration fees for apartments over 150 square meters, in addition to full exemptions for first-time buyers of smaller units. This is expected to stimulate the real estate market and its more than 40 related industries.

 

In agriculture, the government maintained a 75% exemption on export-related fees for agricultural and horticultural goods, strengthening the competitiveness of a sector that employs a large segment of the national workforce. Meanwhile, new industrial investments in development zones were offered additional incentives, reinforcing the push for decentralized development and regional job creation.

 

To improve the investment climate, the government revised the tax schedule under the Investment Environment Law, granting zero-rate tax status to a range of industrial, medical, and research inputs. This measure reduces operating costs and enhances the competitiveness of key sectors.

 

On the fiscal front, the government introduced corrective policies to resolve long-standing disputes between taxpayers and tax/customs authorities. These settlements aim not only to recover overdue payments but also to help businesses correct their legal standing, thereby improving the business climate and promoting economic activity.

 

The government also prioritized social welfare. It waived penalties for taxpayers with outstanding obligations to the public funds directorate through the end of 2024 and canceled additional fees for unlicensed vehicles, regardless of how long the license had lapsed. Furthermore, it increased funding for the National Aid Fund and student support programs, raising the university student support fund by 50% to reach 30 million dinars—relieving financial pressure on families. In support of export-led growth, the government extended income tax exemptions on profits from the export of goods and services until 2033, enhancing Jordan’s competitive edge in global markets.

 

In conclusion, the government’s new economic direction reflects a thoughtful shift toward internal economic stimulation and a balanced approach to reform. This strategy moves beyond mere deficit reduction, aiming instead to broaden the economic base, attract investment, ease burdens on citizens, and promote social equity. If maintained with consistency and discipline, this approach—rooted in Jordan’s Economic Modernization Vision—holds promise for long-term prosperity.

 

The government is clearly moving away from a narrow, accounting-driven approach focused on short-term revenue. Instead, it is pursuing policies grounded in economic logic—emphasizing that growth, not tax hikes, is the key to stronger revenues and a healthier economy. This signals a clear shift in philosophy: growth as the engine, not taxation as the goal.

 

Raad Mahmoud Al-Tal is head of the Economics Department – University of Jordan – r.tal@ju.edu.jo