Saudi Arabia is going to triple the rate the value added tax (VAT) it imposes goods and services. VAT will increase from 5 per cent to 15 per cent on the 1st July. The tax was introduced in Saudi Arabia the first time in 2018. Government authorities say this drastic measure is necessary to curb the effects the coronavirus pandemic the economy. The cut is also part wider austerity measures to help the economy. Finances the oil-rich nation have been badly hit as the pandemic has seen oil prices and demand oil plummet. Analysts are reporting that oil revenues this year have fallen almost a quarter when compared to the same period last year.
Another measure the finance ministry has taken a bid to shore the economy is the suspension a cost of living allowance. This is a payment of $256 per month to state employees. It was introduced to help offset rising prices and more expensive petrol the pump. Saudi's Finance Minister said: "These measures are painful but necessary to maintain financial and economic stability the medium to long term...and to overcome the unprecedented coronavirus crisis the least damage possible." A Gulf expert said: "The move will impact consumption and could also lower the expected revenues. These are pro-austerity and pro-revenue moves rather than pro-growth ones."