Government decisions to stimulate aggregate demand

The government has announced new economic decisions to boost demand on the automotive sector. One key change is a new tax system for electric vehicles (EVs).

Instead of applying the tax all at once, the government will introduce it gradually over three years.

This gradual approach helps keep EV demand steady and gives people and businesses time to adjust to the price changes.

It also reduces financial pressure on citizens, making it easier for them to afford EVs and encouraging a smooth transition to electric vehicles.

For vehicles priced below JD10,000, the tax will be set at 10 per cent in 2025 and gradually increase to 15 per cent by 2027.

This gradual approach balances the need for government revenue with encouraging people to buy EVs.

Vehicles priced between 10,000 and JD25,000 will have a tax starting at 30per cent in 2025, rising to 40 per cent by 2027.

For vehicles priced over JD25,000, the tax will begin at 40 per cent in 2025 and gradually increase to 55 per cent by 2027.

These policies are designed to create fair taxation across different vehicle price ranges while promoting demand for lower-cost vehicles.

The government has also changed how vehicle registration fees are calculated.

Instead of using engine size, the fees will now be based on the vehicle’s value before customs.

This update reflects global changes in the automotive industry, where engine size is less relevant due to technological advancements.

Higher registration fees for fuel-powered vehicles, along with discounts for EVs and hybrids, aim to encourage people to buy energy-efficient cars, promote environmental sustainability and attract investment in EV and hybrid technologies.

Economically, this stimulus is expected to increase aggregate demand by improving citizens’ purchasing power, which will lead to higher consumption of eco-friendly vehicles.

As demand for electric vehicles (EVs) and hybrids rises, it will boost growth in related sectors like charging stations and vehicle maintenance.

This, in turn, will stimulate other industries that depend on these sectors.

Additionally, these decisions are expected to encourage investment in the renewable energy sector, leading to more electric vehicle (EV) charging stations and the expansion of clean energy networks across the country.

This will help support the green economy, which is essential for tackling both environmental and economic challenges.

Economic research shows that promoting renewable energy investments can drive sustainable growth and create new job opportunities in emerging industries, ultimately benefiting the national economy in the long run.

In conclusion, these policies form part of a strategic plan to boost aggregate demand and strengthen the national economy by easing financial pressures on citizens and investors, while promoting a shift towards a greener and more sustainable economy. 

While these measures may result in a short-term decrease in government revenue, the long-term economic advantages will drive the national economy toward sustainable growth.

The successful implementation of these policies will require continuous coordination between the government, citizens and investors to achieve national economic objectives, ensure economic fairness, and foster sustainable development.