On Monday, Saudi Arabia announced it would be tripling its value added tax (VAT) rate to 15 percent from July 1, up from 5 percent.The move comes as the Kingdom also laid out an enormous cost-cutting program to help maintain long-term financial stability in the face of the unprecendented economic fallout of the COVID-19 coronavirus pandemic.In an interview on Monday, Finance Minister Mohammed al-Jadaan noted that these steps were being taken to protect the jobs and health care of the Saudi Arabian people.“These are the priorities: the health care of people and the livelihood of people, and we want to make sure that we maintain our fiscal strength so that as the economy gets out of the lockdown, we are able to support the economy,” al-Jadaan told Bloomberg in a telephone interview.For all the latest coronavirus news visit our dedicated page.The Kingdom’s new VAT rate of 15 percent is still comparatively low compared to most developed economies.Data from the Organisation for Economic Co-operation and Development (OECD), a group of major economies, shows the average VAT rate across members who had the tax in place stood at 19.3 percent.Meanwhile, in Europe the average is even higher, with VAT across OECD member states averaging 21.4 percent.VAT rates: ComparedHere’s the VAT rate of all countries in the OECD with VAT compared to Saudi Arabia:1. Hungary: 27 percent2. Denmark: 25 percent3. Norway: 25 percent4. Sweden: 25 percent5. Finland: 24 percent6. Greece: 24 percent7. Iceland: 24 percent8. Ireland: 23 percent9. Poland: 23 percent10. Portugal: 23 percent11. Italy: 22 percent12. Slovenia: 22 percent13. Europe average: 21.4 percent14. Belgium: 21 percent15. Czech Republic: 21 percent16. Latvia: 21 percent17. Lithuania: 21 percent18. Netherlands: 21 percent19. Spain: 21 percent20. Austria: 20 percent21. Estonia : 20 percent22. France: 20 percent23. Slovak Republic: 20 percent24. United Kingdom: 20 percent25. OECD average: 19.3 percent26. Chile: 19 percent27. Germany: 19 percent28. Turkey: 18 percent29. Israel: 17 percent30. Luxembourg: 17 percent31. Mexico: 16 percent32. New Zealand: 15 percent33. Saudi Arabia: 15 percent34. Australia: 10 percent35. South Korea: 10 percent36. Japan: 8 percent37. Switzerland: 7.7 percent38. Canada 5 percentSource: OECD Tax DatabaseNot all countries in the world impose VAT. Many, such as the US, opt to use a sales tax instead. While VAT is collected by all sellers in every stage of a supply chain, sales tax is only collected by the retailer when a product has reached the end of the supply chain, with end consumers footing the bill.Read more:Jobs, health priority in coronavirus spending cuts, VAT hike: Saudi Finance MinisterCoronavirus: UAE has no plans to increase VAT, says Ministry of FinanceCoronavirus: Saudi Arabia’s $26 bln spending cuts scale back Vision 2030, triples VAT
Source: Al Arabiya
Full Article: Saudi VAT: New coronavirus tax rate one of the lowest among advanced economies
