DUBAI: Saudi Arabia and the United Arab Emirates (UAE) introduced value-added tax from yesterday, a first for the Gulf which has long prided itself on its tax-free, cradle-to-grave welfare system.
Saudi Arabia compounded the New Year blow for motorists with an unannounced hike of up to 127% in petrol prices with immediate effect from midnight.
They are the latest in series of measures introduced by Gulf oil producers over the past two years to boost revenues and cut spending as a persistent slump in world prices has led to ballooning budget deficits.
The 5% sales tax applies to most goods and services and analysts project that the two governments could raise as much as US$21 billion (RM85 billion) in 2018, equivalent to 2.0% of gross domestic product.
But it marks a major change for two super-rich countries where the mall is king. Dubai has long held an annual shopping festival to draw bargain hunters from around the world to its glitzy retail palaces.
Saudi Arabia has deposited billions of dollars in special accounts to help needy citizens face the resulting rise in retail prices.
The other four Gulf states – Bahrain, Kuwait, Oman and Qatar – are also committed to introducing VAT but have decided to delay the move until early in 2019.
The increase in fuel duty in Saudi Arabia was the second in two years. But it still leaves petrol prices as some of the lowest in the world.
High-grade petrol rose 127% from 24 cents a litre to 54 cents, while low-grade petrol rose 83% from 20 cents a litre to 36.5 cents. Duty on diesel and kerosene remained unchanged.
Saudi Arabia has introduced a raft of measures to raise revenue and cut spending as it bids to balance its books. – AFP
Source: The Sun Daily