Saudi Arabia is soon going to step into a new tax regime after it imposes a VAT SYSTEM for the country to streamline its economic regime and gain a firm footing the financial sphere.
What does the tax system imply?
In a first of sorts the Gulf (Saudi Arabia) will be introducing a tax with the introduction of a 5 % value added tax to its goods and services.This move is solely with an intention to boost the revenue and revive the oil dependent economies.
What will the tax be all about?
The tax policy will be carried out on Monday and will impose certain percentage of tax on the certain commodities.
The tax will be imposed on wide range of commodities which includes food,commodities,fuel,entertainment,electronics,telephone,water and electricity bills.
Which are the commodities excluded?
The commodities which are excluded are
Rent,real estate,airline tickets,and also school fees which are totally excluded from this VAT regime.
The move was carried out in Riyadh in the year 2016 and it was developed as a measure of region-wide meet by the Gulf corporation in the year 2016.
How will this move be beneficial?
It will help augment the tax revenues of the Saudi Arabian government which can in-turn be utilized for infrastructural and developmental works.
The other Gulf members are Qatar,Baharian,Oman,Kuwait which have the January 1 2019 deadline to impose the tax.
What will this move imply for the GULF economy?
The move will likely to have a positive impact on the overall economy according to various researchers and economists.
According to the Saudi Arabia IMF Chief it is a crucial step in the correct direction which will be hugely beneficial and make an overall impact for the various investors.
The GULF has suffered tremendously since the oil prices crashed around 4 years ago and the proposed VAT rate will raise the additional revenues of around 1.5 percent depending on the country.
Saudi Arabia grand master plan-
In December this year,Saudi Arabia unveiled its new state budget a number of around 978 billion riyals for the following fiscal year.
The move is spearheading the government’s efforts to re-vitalize and more importantly diversify the kingdom’s oil dependent economy.
How does it affect the cost of living?
Overall there will be a 5% increase in the living costs.Also the uniform,books and school fees will be taxed under the VAT scheme.
On the other hand Saudi is also set to rise the price for the domestic cooing gas by around 80 percent in January 2018.
But it will be seen that the rest of population has less to complain about.
But there are obviously some concerns over the rise in the overall increase in the household expenditures and the subsequent rise in the incomes.
Residents will have to be extra cautious about the spending patterns and expenditures about the overall household expenditure.
Initially it will be tough for the economy but it soon gain momentum.