According to the news just released this morning, Saudi Arabia ’s VAT rate will rise from the current 5% to 15% and will be implemented from July 1, 2020!
Chengye Petroleum
Under the pressure of the epidemic, the tax rate will rise instead of falling
Saudi Arabia said that the low crude oil demand and low crude oil prices caused by the epidemic, together with the additional expenditures of the health sector, put pressure on the government's finances, making it difficult to cope with this situation without affecting the medium and long-term economy.
Saudi Finance Minister and Acting Minister of Economy and Planning Mohammad Aljadaan emphasized that if the government does not take measures to mitigate the economic impact caused by the epidemic, it will have an extremely adverse impact on the performance and stability of public finances.
Declining oil demand
The Minister explained that because the previous world had taken measures to prevent viruses, the first economic shock was an unprecedented decline in oil demand, resulting in a drop in oil prices and a sharp reduction in oil revenue. Oil is the main source of public revenue in the country.
Reduced economic activity
Second, after the necessary precautions were taken to protect national health, local economic activities were largely suspended or reduced, which had a negative impact on non-oil revenue and economic growth.
Unplanned expenditure increases
The third economic shock is the increase in unplanned expenditures. In addition to adopting a series of measures to support the economy, the government has increased support for the health care sector to improve the service capacity of the sector and the ability to prevent and control the epidemic. The country also Maintaining the work of citizens during the epidemic was an expensive expense.
Reduce expenditure
The minister said that the combination of these challenges puts pressure on public finances. If this pressure is not resolved, it will affect the country ’s overall economy for a long time. Therefore, it is necessary to further reduce expenditures and take measures to stabilize non-oil revenues.
The Saudi Ministry of Finance and the Ministry of Economic Planning introduced financial and economic development and issued a measure that is currently the most appropriate and least harmful option.
The estimated expenditure reduction is about 100 billion Saudi Riyals: cancel, extend or postpone the operation and capital expenditures of certain government agencies; in fiscal year 2020, reduce the financial allocation of some planned or major projects.
Suspension of living allowance
In addition, the subsistence allowance will be suspended from June 2020, and the value-added tax in July 2020 will be increased from 5% to 15%.
In addition, in order to improve the efficiency of expenditure, Saudi Arabia has established a ministerial committee to study the payment to employees, contractors and employees of similar status in government ministries, agencies, agencies, centers and plans not subject to the Civil Service Law. Financial income, and make recommendations within 30 days.
