Saudi Arabia Hikes VAT to 15% from July

A double whammy of low oil prices and the coronavirus pandemic slowdown has left the Kingdom of Saudi Arabia with a $9 billion budget deficit in the first quarter of this year.

In order to shore up finances, the government has announced a sharp increase in Value Added Tax (VAT) from the current 5% to 15% effective from July 1, 2020.

Meanwhile, the UAE Finance Ministry has in a tweet denied that it has any plans to raise VAT rates any time soon.

With unplanned expenses draining foreign exchange reserves, the Saudi Government has canceled or put on hold a number of operating and capital expenditures including the popular cost of living allowance of $267/month for state employees.

Saudi Finance Minister Mohammed al-Jadaan described the measures as "painful but neccesary".

A committee has been formed to study all financial benefits paid to public sector employees and contractors, and will submit recommendations within 30 days.

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