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28 May, 2020

Saudi Arabia Triples VAT and Cuts Allowances

The Government of Saudi Arabia announced a three-fold increase in VAT to 15%, in order to combat the fiscal setbacks caused by the effect of the Covid-19 pandemic.

 

The KSA Government measures, estimated to the tune of $26.6 Billion, is expected to boost federal revenue while maintaining rational outlook on Government or Government-aided spending, as per the Saudi Press Agency.

 

Earlier in March, crude prices witnessed an unprecedented crash, with Brent going down by nearly 50%, translating to a monthly erosion of $27 Billion of the Saudi Arabian net foreign asset value. This price cut, coupled with a huge deduction in oil prices, led to a severe economic setback for the Government of KSA. The Finance Minister of KSA admitted that measures may be painful but were essential to bring economic stability and fiscal protection.

 

Starting July 1, the VAT will increase to 15%, while from June 1, the Government will cease to provide Government workers with the cost-of-living allowances. Some aspects of capital spending are expected to be delayed or even cancelled, especially under the Vision 2030 economic transformation plan. Salaries of employees working outside Government sector are to be studied and a committee will provide their recommendations in this regard.

 

The measures are expected to put KSA back on economic recovery by the end of the year 2020.

 

Source: Gulfbusiness

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