Categories: Business

Saudi Arabia tripled tax on goods, to cut government spending by $ 26 billion


Saudi Arabia triples taxes, cuts 26 billion dollar in costs amid pandemic

Dubai. Saudi Arabia, facing the Corona virus epidemic and low oil prices, has announced a three-fold increase in value-added tax (VAT) on basic goods to 15 percent. It also plans to cut spending on various projects and other items by about $ 26 billion. According to the country's Finance Minister, not only this, Saudi citizens will also have to lose their living cost allowance applicable from 2018.

Despite efforts to diversify Saudi Arabia's economy, the country is still largely dependent on oil earnings. The price of Brent crude is currently around $ 30 per barrel. This is much less than the amount needed to balance Saudi Arabia's budget. Apart from this, the country is also facing revenue loss by prohibiting the arrival of devotees in Mecca and Medina. In view of the Korana virus epidemic, these Pak cities have been closed for devotees.

This is the biggest step for a large oil producing country in the Gulf region since oil prices came down by more than half in March. There are apprehensions that other neighboring countries may impose higher rates on their citizens this year. However, the UAE said on Monday that it had no such plans at the moment. The International Monetary Fund has said that all six energy-producing countries of the Gulf Arab region will have an economic slowdown this year. Mohammed Al Jadan, Saudi Arabia's Finance Minister and Acting Minister for Economy and Planning, said that we are facing a crisis that has never been seen in modern history. A state of uncertainty has arisen from this crisis. He said that the measures that have been taken are stringent but necessary for comprehensive financial and economic stability. The number of corona virus infected patients in Saudi Arabia is 41,000. Of this, 255 people have died.

According to the Finance Minister, spending cuts of $ 26 billion include suspending some operating and capital expenditures of government agencies. Apart from this, the government will stop living cost allowance starting from June. This puts a burden of $ 13.5 billion annually on the state exchequer. Saudi Arabia also said it would increase VAT on goods from 5 percent to 15 percent. Most goods and services were first taxed in 2018, with the aim of increasing revenue.

This post was published on May 12, 2020 9:52 am

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