Saudi finance ministry announced Monday the kingdom the value added tax (VAT) rate will increase from 5 % to 15 % from July 1 as part of austerity measures taken to prop up the economy hit by the impacts of low global oil price and covid-19 pandemic.
In addition to the three-fold increase in the VAT, the ministry in the statement relayed state-run news agency SPA also the Gulf country will cut from June the cost of living allowance.
“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,” Finance Minister Mohammed al-Jadaan said in the statement.
The measures came after the kingdom posted a $9 billion budget deficit in the first quarter due unplanned expenditures to support the health sector battling with covid-19. Jadaan last week reportedly said Saudi Arabia would have to take “strict and painful measures” to deal with the twin impact of coronavirus pandemic and falling world oil prices.
The country’s oil revenues in the period have slumped by 22 per cent to reach $34 billion because of the crash of crude oil global price.
Saudi Arabia triples VAT as part of austerity measures
