Tourists, who have vowed to view the world from topmost floor of Burj Khalifa and experience luxuries of gulf countries in this new year, don’t consider this a bizarre news because it is absolutely true that authorities there have planned to impose a 5% value added tax (VAT) from this year on most goods and services to boost revenue after oil prices collapsed three years ago.VAT will apply to a range of items like food,clothes,electronics,gasoline, phone,water,electricity bills and hotel reservations.There will be some exemptions for big-time costs like rent,real estate sales, certain medications,airline tickets and school tuitions.

The move is a part of region-wide measure agreed upon by six gulf cooperation council (GCC) member states in Riyadh in 2016. “The imposition of VAT will help to raise tax revenue of the Saudi government to be utilised for infrastructure and developmental works” said by Mohammed Al-Khunaizi, a member of Saudi’s Shoura Council.

Reason behind these tax reforms are to take out their state from shackles of fiscal deficit.Till now there was no such tax on commodities and due to this fact it has become a centre of worldwide tourism and has attracted workforce from Asian nations.

New tax system will surely lead to transfer of money from public to government and will increase government’s income.It is also said that introduction of tax reforms is an important step in right direction and likely to be positive for investors in long run.

Collapse in worldwide prices of crude oil three years ago had slumped their economic growth and economy witnessed revenue deficit, but with commencement of revamped tax system which has recommended by international monetary fund (IMF) will be able to take out these countries from economic slackening. There will be issues like price rise of commodities due to tax imposition but this will lead to improvement in state of economy in long run.


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