Friday, May 6, 2016

5% Value Added Tax to be imposed in Saudi Arabia

The retail sector of the Kingdom of Saudi Arabia will be losing 5 percent of their total sales in the first year, after a VAT or Value Added Tax had been imposed on them by the end of this year, stated accountants and economists. This new tax is aimed towards rationalizing the general consumption of the Saudis. This type of Value Added Tax will also help the Kingdom of Saudi Arabia in controlling the growing rate of inflation, stated a financial expert. He further added that this imposition of the Value Added Tax, the government which is receiving the correct data about the production of the costs of the commodities, will be able to monitor the prices more effectively of the end products in the market.

The Gulf Cooperation Council Countries have decided upon imposing a 5 percent Value Added Tax gradually on several products which would be including consumer products, over the next two years. This move would also aim at preventing the people from using any harmful products hence would reduce import of luxury goods and increase state revenues. An accountant researcher at the RMIT University located in Australia, Dr. Hassan Hekami, has described VAT as one of the most commonly imposed taxes upon the consumer goods all around the world. He stated more than 145 countries have imposed the tax in order to reduce consumption and encourage saving amongst the general public.

He stated that the retail sector of the Kingdom of Saudi Arabia would be losing 5 percent of the sales as a result of the imposition of this new tax. It would also reduce the GDP or Gross Domestic Product. It would in fact cost more than 5 percent to the private sector as they would be forced to completely restructure their accounting and billing systems. Hekami also highlighted the positive impact of the imposition of the VAT in controlling the growing rates of Inflation in different countries. The VAT will be providing detailed information to the government about the cost of production and the prices of commodities which would give them more leverage while controlling inflation and prices.

It would also aid in eradicating the disorganized trade being carried out by any illegal agencies as the companies would now be dealing with the official agencies only. This will in turn contribute in increasing the number of job opportunities for the Saudi people at the commercial agencies and pushing the illegal operators out of the Saudi Market.  Hekami has urged all the universities to plan ahead in order to meet the new requirements of the job market.

Fadel Bin Saad Al Bouainain has stated that the VAT would not be imposed exclusively on the end products would also upon the raw markets. This would mean that the impact would be not only on producers and consumers but on the market in general. It is safe to say that the Value Added Tax would be affecting the consumption of the commodities and hence reducing sales of companies along with their profits.

Source: Saudi Gazette

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