Saudi Arabia to Raise VAT Threefold and Suspend Cost of Living Allowances

 Saudi Arabia is suspending the cost of living allowance and increasing the value-added tax (VAT) as part of measures to address the impact of the COVID-19 crisis, the Saudi Press Agency (SPA) reported on Monday.

“Cost of living allowance will be suspended as of June first, and the value added tax will be increased to 15% from 5% as of July first,” SPA said, citing statement of the Ministry of Finance.

Finance Minister Mohammed Al-Jadaan said the twin measures are part of efforts to shore up state finances, which have been battered by low oil prices and the coronavirus crisis.

Al-Jadaan warned last week that Saudi Arabia would have to take “strict and painful measures” to deal with the twin impact of coronavirus pandemic and falling world oil prices.

“We must reduce budget expenditures sharply,” Al-Jadaan said, adding that some government projects may be slowed down to reduce expenditure.

“Current actions taken to date to cut spending are not enough, and Saudi public finances will need more control and the journey ahead is long,” he said.

The pandemic has wrecked the global economy, leaving millions out of work, with the US alone reporting more than 20 million people becoming unemployed in April.

Worldwide, the COVID-19 has infected more than 4.18 million people as of early Monday, with the death toll surging to 283,000 since the coronavirus was first detected in Wuhan, China last December.

In Saudi Arabia, the number of infections rose to 39,048 as of Sunday, of which 27,345 were active cases and 11,457 have recovered.

The Health Ministry reported 7 new deaths on Sunday, all expatriates, raising the death toll to 246.

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