Saudi Arabia to introduce Value-Added Tax by 2018
Riyadh, (IINA) – Saudi Finance Minister Ibrahim Al-Assaf stated on Wednesday that the Kingdom does not plan to introduce income tax for individuals. However, value-added tax (VAT) would be introduced by 2018, Arab News reported.
Al-Assaf said in a statement that the decision to add VAT had been agreed upon at the 102nd meeting of GCC finance ministers in Riyadh. The discussions had taken place at a gathering of the Committee on Financial and Economic Cooperation, which includes ministers from other GCC states.
The decision was based on an agreement taken by the Supreme GCC Council earlier this year to introduce VAT in the six GCC countries, said Assaf. It was agreed that VAT would be introduced by 2018.
Al-Assaf said VAT, which would be imposed on certain commodities, was much easier to administer than other taxes, many of which were easy to evade.
In an interview with The Economist in January, Deputy Crown Prince Mohammed bin Salman had indicated that VAT would be introduced, with no income or wealth taxes. “We’re talking about taxes or fees that are supported by the citizen, including VAT and the sin tax. They will create good revenues, but not the only revenues”, he said.
Other reports indicate that the GCC bloc would introduce VAT of up to 5 percent. The tax would exclude 95 food items, but would apply to all citizens and residents. Health, education, and social services would likely be excluded.
Introducing VAT is considered a significant economic reform in the GCC countries, which have minimal tax systems and no tax on income, although some levy fees such as road tolls.
AG/IINA