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.