Government hikes tobacco tax, high-end electric vehicles

The Cabinet has approved amendments to the 2024 Special Tax System, reducing the special tax on gasoline-powered vehicles and increasing it progressively for higher-priced electric vehicles.

The revisions aim to narrow the gap between the taxes imposed on electric vehicles and other vehicles while maintaining a lower tax rate on electric vehicles compared to their non-electric counterparts.

The new system also includes changes to the tax on tobacco products, aligning with the national strategy to combat all forms of smoking. The changes target the rapid rise in e-cigarette use, particularly among children, and address significant tax disparities between traditional cigarettes and alternative products.

Gasoline and Hybrid Vehicle Taxes

Jihad Abu Nasser, the representative for the automotive sector at the Free Zones Investors Authority, told Roya that the special tax on gasoline vehicles in Jordan stands at 76 percent, with an additional 16 percent general sales tax. This rate has been in effect since 2012.

Meanwhile, electric vehicles with a power capacity of up to 250 kilowatts are subject to a 10 percent special tax, which rises to 15 percent for higher capacities, following an amendment made in 2019. Hybrid vehicles have been taxed at 55 percent since 2021.

With the recent government announcement of new adjustments, which include lowering taxes on gasoline vehicles and raising them gradually for more expensive electric cars, the association stated that it has yet to review the specifics of the decision.

Experts anticipate that the changes will increase demand for gasoline vehicles after a period of decline, while electric cars will continue to attract consumers.

The government explained the rationale behind these tax adjustments. Government spokesperson Muhannad Mubaideen stated in a press conference: “The decision to lower the tax on gasoline cars and increase it on higher-end electric vehicles aims to address an economic imbalance.”

He added that electric cars priced under JD 10,000 before customs duties would not be affected by the tax hike.

The special tax on gasoline vehicles has been reduced from 67 percent to 60 percent, with hybrid vehicles now taxed at the same rate.