Price hike to end Middle East’s top tax havens

Saudi Arabia and the United Arab Emirates’ status as tax havens is about to change, with plans to impose a 5 per cent tax next year on most goods and services to boost revenue.

The value-added tax, or VAT, will apply to a range of items like food, clothes, electronics and gas, as well as phone, water and electricity bills, and hotel reservations.

The two countries have long lured foreign workers with the promise of a tax-free lifestyle, but the move has been triggered after oil prices collapsed three years ago.

There will be some exemptions for big-ticket costs like rent, real estate sales, certain medications, airline tickets and school tuition.

Higher education will be taxed in the UAE. Extra tuition costs such as uniforms, books and school bus fees will also be taxed.