Saudi Arabia has tripled its VAT rate as the government prepares for life and a new economy in the Kingdom living with the Coronavirus.
The Value Added Tax increase from 5-15% is part of austerity measures designed to bring more money in from residents as well as cut spending. Saudi recorded a huge $9bn budget deficit in the first quarter of 2020. And they’re due to cut spending by $26 billion.
Saudi Arabia is the largest oil-provider in the world. And it’s seen its income plummet in recent months due to the Coronavirus pandemic. Oil prices plunged to their lowest-ever prices and with far fewer people travelling, the demand for oil has also hit rock bottom.
The Saudi government also announced it was suspending its cost of living allowance. Previously, 1.5 million state employees were given 1,000 riyals a month (AED977) to help them out. That has now been cut from June 1 and VAT tripled from July 1 in Saudi Arabia.
“These measures are painful but necessary to maintain financial and economic stability over [the] medium to long term… and overcome the unprecedented coronavirus crisis with the least damage possible,” finance minister Mohammed al-Jadaan said in the statement.