Saudi Arabia hikes Value-Added Tax to 15% from July
- Author: Darren Santiago May 12, 2020,
May 12, 2020, 0:26
In addition, the cost-of-living allowance shall be discontinued as of June 2020 and Value-Added Tax shall increase from 5% to 15% as of July 2020.
The petro-state also announced it would be slashing prices on domestic oil by 50 per cent starting from today.
Also, as from June, living allowance, ordered two years ago for state and military employees, would be suspended.
The Kingdom has also made a decision to cancel, extend, or postpone some operational and capital expenditures for some government agencies, as well reduce provisions for initiative of a number of Vision Realization Programs and major projects for the fiscal year 2020. The kingdom reported a $9 billion budget deficit in the first three months of the year as oil revenues in the period fell by nearly a quarter from a year earlier to $34 billion, bringing down total revenues by 22%.
He described the measures as "important to shield the kingdom's economy to overcome the unprecedented global coronavirus pandemic and its financial and economic repercussions with the least damage possible". Under the most recent OPEC+ deal, Saudi Arabia was targeting production of 8.492 million barrels a day.
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Riyadh has posted a budget deficit every year since the last oil price rout in 2014.
The share sale is part of the country's effort to wean off its economy from oil dependence.
More than half of Saudi Arabia's pubic revenues depend on income from oil-related activities. In December last year, they had been diminished to $499bn, a loss of $233bn in four years, according to the Saudi Arabian Monetary Authority. Brent crude now hovers around $30 a barrel, far below the range Saudi Arabia needs to balance its budget. It is unclear if the NEOM project, a $500-billion megacity set to be built along the kingdom's western coast, will be impacted. "With hardship will come more scrutiny of state spending elsewhere including the purchase of a football team and millions spent on entertainment events".
Saudi Arabia, the world's largest oil exporter, is also being hit hard by measures to fight the new coronavirus, which are likely to curb the pace and scale of economic reforms launched by Crown Price Mohammed bin Salman.