The International Monetary Fund (IMF) suggested that Saudi Arabia would see positive economic benefits by raising its Value Added Tax (VAT) to 10% after successfully implementing a 5% VAT last year.
“The introduction of the VAT in January 2018 was a landmark achievement, with revenue collections exceeding expectations,” the Washington-based lender said in a report published late Monday. “[IMF] staff suggested that consideration be given to raising the VAT rate from 5 to 10 percent, in consultation with the GCC.”
The move may help Saudi Arabia offset any uncertainty from volatile oil prices, and could have a 2 percent positive impact on the Kingdom’s GDP by 2024, “far greater than water and wage reforms or savings from capital spending and interest payments.”
The Kingdom’s Vision 2030 economic and social reforms “are starting to yield positive results in Saudi Arabia,” the IMF says. Oil prices and production have been volatile, and uncertainties in the global oil market continue, so promoting non-oil growth and creating jobs for Saudi nationals remain key challenges.
The IMF also said that a tighter fiscal policy was needed, as the Saudi budget deficit is projected to widen.