Economists: Tax Exemptions On Production Inputs To Bolster Competitiveness, Stimulate Growth

(MENAFN- Jordan News Agency)

Amman, Sept. 10 (Petra) -- Economic experts and private sector leaders welcomed the government's recent decision to subject key production inputs and vital sector requirements to a zero-percent sales tax, describing the measure as a strategic catalyst for enhancing national competitiveness, attracting investment, and fostering sustainable economic growth.
The exemption forms part of a broader package of fiscal and structural reforms designed to create a more conducive business environment, alleviate operational burdens on productive sectors, and strengthen Jordan's position as a regional investment hub. The move comes at a critical time as the national economy contends with elevated costs and sluggish growth.
Economists stressed that the initiative is integral to Jordan's ongoing Economic Modernization Vision, aimed at reinforcing the production base, curbing inflationary pressures, and improving the overall investment climate.
President of the Jordanian Contractors Association, Fuad Al-Duwairi, noted that the measure represents a significant boost for the contracting and construction sector, one of the Kingdom's key economic engines and job creators. By including construction materials and spare parts among zero-rated goods, the government is expected to lower operational costs for engineering projects, improve contractors' ability to meet technical standards and delivery schedules, and enhance execution capacity on large-scale infrastructure and public works projects.
Al-Duwairi emphasized that the decision is consistent with Investment Environment Law No. 21 of 2022, reflecting Jordan's commitment to fostering a competitive, investor-friendly business climate. He urged continued collaboration with unions and the private sector to expand exemption lists in order to support sustainable development and long-term growth.
From an academic perspective, Omar Al-Gharaibeh, Professor of Finance at Al al-Bayt University, highlighted that the policy could lower production costs by up to 4% in certain industries. This cost reduction is expected to expand profit margins, incentivize reinvestment, and attract new domestic and foreign investors.
Al-Gharaibeh projected that the measure could increase annual inflows of foreign direct investment by as much as 8%, provided it is accompanied by stability in economic legislation and simplification of registration and licensing procedures. He added that while the immediate impact on consumer prices may be limited, the measure is likely to play a vital role in restraining inflation and preventing further cost-driven price escalations.
The broader economic gains, he said, could include a 1% annual increase in GDP, expanded export capacity, and enhanced competitiveness of Jordanian products in both regional and international markets. Lower operational costs would also generate employment opportunities, with potential annual job creation growth of 1–2% and a reduction in unemployment rates by 0.5–1%, assuming tax savings are directed toward production expansion rather than retained as additional profits.
Echoing similar views, Saher Al-Adous, Professor of Finance at Al-Balqa University, described the policy as a decisive government step to support the production base and ease pressures on strategic sectors amid rising input costs and persistent inflationary trends.
He stressed that the exemption underscores the government's awareness of the importance of cultivating a stable, attractive investment climate that aligns with regional market demands. The policy, he argued, positions Jordan more competitively compared with neighboring economies that impose higher taxes on production inputs.
Experts concur that the tax exemption is more than a short-term relief measure; it is a structural incentive aimed at strengthening Jordan's productive capacity, encouraging capital inflows, and reinforcing macroeconomic stability. If sustained and complemented by broader reforms, the policy could play a pivotal role in driving long-term growth and safeguarding the economy against external shocks.

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