Saudi Arabia to Raise $9b From VAT in 2018

Saudi Arabia expects to raise $9.35 billion in revenue from the implementation of value-added tax (VAT) in 2018, according to Hamoud Al-Harbi, VAT project manager at the kingdom’s General Authority of Zakat and Tax (GAZT).

Speaking to the Emirates News Agency on Tuesday, Al-Harbi noted that the revenues raised through VAT will be used by the Saudi government for infrastructure and development projects, Arabian Business reported.

Additionally, he noted that the GAZT will take action against those who have still not registered for VAT, and is working with the ministry of commerce and investment to carry out inspections and identify irregularities in VAT’s implementation throughout the kingdom.

According to analysts, Saudi Arabia and the UAE – the only two (Persian) Gulf Cooperation Council countries to have begun implementing VAT– could collectively raise as much as $21 billion from the 5% tax in 2018, equivalent to 2% of GDP.

In December, Riyadh posted budget deficits totaling $260 billion over the last four fiscal years. Saudi officials do not expect the kingdom to balance the books before 2023.

 VAT for Tourists

GAZT has also announced they are working on a mechanism that will allow for the return of VAT to tourists.

“According to executive regulations, it is possible for companies to return the VAT to tourists on products they are taking to their countries,” Al-Harbi said.

“The mechanism will be decided later as we are still working on the process, mechanisms, rules and payment. Some countries, for example, specify what amount to return; if it is less than €100 ($134) it will not be returned,” he added.

In a statement, Al-Harbi added that the implementation of the tax-free system for tourist purchases will not be applied in early January, when VAT is widely adopted across the kingdom.

The oil-kingdom started 2018 with a hike of local gasoline prices and electricity tariff.

Effective from January 1, the Saudi Ministry of Energy, Industry and Mineral Resources announced plans to increase the price of Octane 91 fuel from 0.75 riyals (20 cents) per liter to SR1.37 (36 cents) per liter (82% increase) and 95 Octane from 0.90 riyals (24 cents) per liter to SR2.04 (54 cents) per liter (up 126%). Diesel for transport remains unchanged.