In order to reduce the impact of falling oil prices and the COVID19 financial impact, Saudi Arabia has increased VAT to 15% and slashed salaries of govt employees.
Why did they increase VAT?
Saudi Arabia has been going through one of the toughest phases of all times due to coronavirus pandemic. The petroleum sector accounts for roughly 87% of Saudi budget revenues, 90% of export earnings, and 42% of GDP.
COVID19 has negatively impacted Saudi Arabia in two ways;
- Saudi Economy has slowed down due to the lockdown.
- The lockdown in the entire world has resulted in the reduction of oil prices of around $65 to $30 (once touched $15).
What are the economic measures taken?
In order to reduce the economic impact of these two problems Saudi Arabia has,
- Increased VAT from 5% to 15% starting from July 2020.
- Suspended cost-of-living allowances starting from June 2020.
- Cut budget spending by SR 100 billion.
- Revised benefits of the government contractors.
Earlier today, Saudi Aramco announced the reduction in the domestic petroleum prices where they reduced the price of;
- 91 octane from SR 1.31 to SR 0.67.
- 95 octane from SR 1.47 to SR 0.82.