Saudi Arabia and the United Arab Emirates are ringing in the new year with the introduction of a five percent value-added tax (VAT) on most goods and services, in an effort to boost revenue and revive their oil-dependent economies.
The tax, which goes into effect on Monday, will be imposed on a wide range of commodities, including food, clothes, fuel, entertainment, electronics, and telephone, water and electricity bills.
Rent, real estate sales, airline tickets and school fees are excluded from the scheme.
The move is part of a region-wide measure agreed upon by the six Gulf Cooperation Council (GCC) member states in Riyadh in 2016.
“The imposition of VAT will help to raise tax revenues of the Saudi government to be utilised for infrastructure and developmental works,” Mohammed Al-Khunaizi, a member of Saudi’s Shoura Council, said on Sunday.
The other GCC members – Qatar, Bahrain, Oman and Kuwait – have until January 1, 2019, to impose the tax.