Saudi Arabia should double its value added tax (VAT) rate from 5% to 10% according to a report by the International Monetary Fund (IMF).
The IMF said on 9 September that a tighter fiscal policy was needed in consultation with other Gulf countries, as the Saudi budget deficit is forecast to grow.
“The introduction of the VAT in January 2018 was a landmark achievement, with revenue collections exceeding expectations. The reduction in the registration threshold at the beginning of 2019 has also gone smoothly. Staff suggested that consideration be given to raising the VAT rate from 5% to 10%, in consultation with the GCC”, it said after the consultation with the kingdom.
The likely timetable for the hike is expected after 2021 after Kuwait and Oman are both ready to implement it as a customs union, analysts said.
The UAE introduced a 5% VAT rate at the same time as Saudi Arabia.
