Tax-free days ending for Saudis after oil slump
Tax-free living will soon be a thing of the past for Saudis after the cabinet on Monday approved an IMF-backed value-added tax to be imposed across the Gulf following an oil slump.
Residents of the energy-rich region had long enjoyed a tax-free and heavily subsidised existence but the collapse in crude prices since 2014 sparked cutbacks and a search for new revenue.
Saudi Arabia is the world's biggest oil exporter and the largest economy in the Arab region.
It froze major building projects, cut cabinet ministers' salaries and imposed a wage freeze on civil servants to cope with last year's record budget deficit of $97 billion.
It also made unprecedented cuts to fuel and utilities subsidies.
The kingdom is broadening its investment base and boosting other non-oil income as part of economic diversification efforts and aims to balance its budget by 2020.
The cabinet "decided to approve the Unified Agreement for Value Added Tax" to be implemented throughout the six-member Gulf Cooperation Council, the official Saudi Press Agency said.
The move has IMF backing, which recommended the Gulf States impose revenue raising measures. The countries have already introduced taxes on tobacco and fizzy drinks.
“A Royal Decree has been prepared,” the official Saudi Press Agency said.
The tax on tobacco, now at 50 per cent, will be increased to 100 per cent, the same level as those for energy drinks and sodas.
Last year, the world’s largest crude exporter announced some austerity measures. Saudi Arabia froze major infrastructure projects, slashed ministers’ salaries and imposed a wage freeze on civil servants. Riyadh managed to reduce the budget deficit from a record $98 billion in 2015 to $79 billion last year.
The country also made unprecedented cuts to fuel and utility subsidies, as it seeks to diversify its revenues to balance the budget by 2020.
Sources: AFP, RT