The Kingdom of Saudi to increase VAT discontinue the value of living allowance and increasing VAT to fifteen percent from 5 percent to combat the consequences of the pandemic, media reports said.
The dominion has increased VAT threefold to spice up state finances. The cost of living allowance within the Kingdom is going to be suspended from June and VAT is going to be increased from July onward.
The allowance was provided as a bonus for state and military employees. Additionally, Saudi to increase VAT and the dominion will reduce fund allocations for projects which were a part of Vision 2030.
In fact, a committee has been established to review the financial benefits provided to all or any employees, contractors of comparable status, the media reports said.
Finance Minister Mohammed Al Jadaan, said within the statement, “These measures are painful but necessary to take care of financial end economic stability over medium to long term and overcome the unprecedented coronavirus crisis with the smallest amount damage possible.
Of these challenges have cut state revenues, pressured public finances to A level that’s hard to pander to going forward without affecting the economy on the medium to future, which needs more spending cuts and measures to support non-oil revenues stability.”
In the first quarter of 2020, state revenues were down 22% from the same time last year, with the deficit reaching $9 billion, or 34 billion riyals. Oil revenues specifically were down 24%, compared to the same quarter last year. To cover the budget deficit, Saudi Arabia drew $26.8 billion from its net foreign assets in March in what economists say marked the fastest monthly contraction in more than two decades.
It is reported that the Saudi government is committed to implementing measures to guard citizens, residents, and also the economy at large by mitigating the negative effects of the Covid-19 pandemic.
As per government minister Mohammed Al Jadaan, the pandemic has led to 3 economic shocks and each of them could have a significant impact on the performance and stability of public finance.
