Saudi Arabia to make its value added tax (VAT) triple as a part of austerity measures to support its economy due to coronavirus-hit.
The Saudi government also said it’ll suspend its cost of living allowance to sustain state finances.
The nation famous for oil, has seen its income plummet because the impact of the pandemic has forced down energy prices globally.
The VAT was first introduced in KSA in 2018 as a part of efforts to chop its reliance on world crude markets.
Saudi Arabia’s state news agency said VAT will rise from 5% to 15% as of 1 July, while the cost of living allowance will be suspended from 1 June.
“These measures are painful but necessary to maintain financial and economic stability over [the] medium to long term… and overcome the unprecedented coronavirus crisis with the least damage possible,” finance minister Mohammed al-Jadaan said in the statement.
The declaration came after state spending outstripped earning, pushing the country into a $9bn (£7.2bn) deficit within the first three months of 2020.
That’s as oil revenues within the time dropped by almost one fourth from a year earlier to $34bn, putting down total revenues by 22%.
At the same time, the country’s Central Bank saw its foreign reserves fall in March at their fastest rate in a minimum of twenty years and to their lowest level since 2011.
The measures to combat the effect due to coronavirus are expected to reduce the pace and scale of economic reforms launched by Crown Price Mohammed bin Salman.
In 2019, the nation raised a record $25.6bn within the initial public offering of shares in state-owned oil giant Aramco in the capital city.
