Saudi Arabia triples VAT rate as oil revenues tumble

Saudi Arabia triples VAT rate as oil revenues tumble

Saudi Arabia will triple its value added tax and suspend a cost of living allowance for state employees.

The Kingdom’s Finance Minister made the announcement Monday (May 11), as authorities tried to protect an economy battered by falling oil prices and a slowdown.

Mohammed al-Jadaan said VAT would rise from 5 to 15% from July 1st, while the living allowance will be suspended from June 1st.

The Minister called the measures ‘painful’ but ‘necessary’ to shore-up the economy in the medium to long-term.

About 1.5 million Saudis work in the state sector.

Since 2018 Riyadh has paid state employees $267 a month to compensate for the higher cost of living after VAT was first introduced.

The austerity measures come as Saudi Arabia posted a $9 billion budget deficit in the first quarter.

The world’s largest oil exporter was hurt by a slump in prices.

Oil revenues fell 24% from a year earlier in the first three months of the year to $34 billion.

But with consumer spending expected to tumble, some economists say the VAT hike may not do much to plug the budget hole.

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