Saudi Arabia triples VAT after oil price plunge

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Saudi government will also suspend its cost of living allowance for state workers

Saudi Arabia is to increase its value added tax (VAT) by three times as part of austerity measures to support its economy hit by the coronavirus.

The government also said it will suspend its cost of living allowance for state workers as it looks to shore up finances hit by low oil prices.

The world’s largest oil exporter has seen its income plunge as the virus impact has led to fallen global energy prices.

Saudi Arabia first introduced VAT two years ago, as part of efforts to cut its reliance on world crude oil markets.

“The cost of living allowance will be suspended as of June 1, and the value added tax will be increased to 15 per cent from 5 per cent as of July 1,” said finance minister Mohammed al-Jadaan.

“These measures are painful but necessary to maintain financial and economic stability over the medium to long term…and to overcome the unprecedented coronavirus crisis with the least damage possible,” he added in a statement.

The allowance of 1,000 riyals ($267, €245) per month to state employees was introduced in 2018 to help offset increased financial burdens including VAT and a rise in the price of petrol.

The announcement comes after the kingdom posted a $9bn budget deficit in the first quarter.

That’s as oil revenues in the period fell by almost a quarter from a year earlier to $34bn, pulling down total revenues by 22 per cent.

 

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