Page 57 - Focus Group
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Learnings from the recent
Saudi VAT Rate increase
• Oil prices well below the
Background pandemic. fiscal balance levels
The Saudi Ministry of Finance Analysis • Lower Govt revenues due to
on 10 May 2020 announced an reduced economic activities
increase to the value added The recent announcement by
tax (VAT) rate as a measure the Saudi Finance Minister of • Increased spend on health
to counter the economic increase in VAT rate from 5% to & welfare measures
implications of the coronavirus 15% has opened a Pandora’s Box In the current difficult economic
(COVID-19) pandemic. The VAT .This was never imagined in the
current economic environment. environment, GCC countries will
rate has been increased It is not hard to imagine the evaluate and take necessary
to 15% (from the current rationale behind such a measure steps to protect their fiscal
rate of 5%) effective 1 considering the impact on fiscal revenue and balance. It is a
question of ‘Not Why but When’.
balance for the GCC countries.
July 2020. The tripling of the However, the scale and swiftness We should take this as a likely
VAT rate is intended to address of the measure has surprised all business event and move on
the fiscal imbalance caused by including the economic experts. to the next step of scenario
a decrease in consumer and planning and preparation for
commercial spending, the loss GCC Governments are under such an eventuality of change in
of oil and tax revenues, and the pressure of increased fiscal VAT rates and applicability. This
cost of healthcare initiatives put deficit as a result of the below would enable the organizations
into place in response to the factors to be better prepared if and when
The Institute of Chartered Accountants of India (Dubai) Chapter NPIO TAX JOURNAL 2020 57
