Gulf’s first: Saudi, UAE introduce VAT

Dubai, Jan. 1: Saudi Arabia and the United Arab Emirates introduced value- added tax from Monday, a first for the Gulf which has long prided itself on its tax- free, cradleto- grave welfare system.

Saudi Arabia compounded the New Year blow for motorists with an unannounced hike of up to 127 percent in petrol prices with immediate effect from midnight.

They are the latest in a 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 five percent sales tax applies to most goods and services and analysts project that the two governments could raise as much as $ 21 billion in 2018, equivalent to 2.0 percent of GDP.

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 delayed the move until early 2019.

None of the Gulf states levy any personal income tax and none have any plans to do so.

The International Monetary Fund has repeatedly urged Gulf states to diversify their revenues away from oil, which accounts for more than 90 percent of the Saudi budget and 80 percent in the UAE.

Both Riyadh and Abu Dhabi asked all companies with earnings of $ 100,000 or more a year to register in the VAT system.

Saudi Arabia compounded the New Year blow for motorists with an unannounced hike of up to 127 percent in petrol prices with immediate effect from midnight They are the latest in a series of measures introduced by Gulf oil producers over the past two years to boost revenues and cut spending to cover budgect deficit