Saudi Arabia has no plan to cut VAT rate any time soon, says Saudi Finance minister

Dubai: Saudi Arabia has no plans to cut the value-added tax (VAT) anytime soon, a top senior official confirmed on Monday.

Speaking to the Saudi Asharq News on the sidelines of the G20 summit in Rome, the Kingdom’s Minister of Finance Mohammed Al Jadaan clarified that the decision on whether to reduce VAT or not will be reviewed several years later, when the public finances improve.

The minister emphasised that the end goal of increasing VAT was to deal with the economic repercussions of the COVID-19 pandemic. He said when the public finances improve the decision will be revisited. However, there will be no VAT cut anytime soon.

In May last year, Saudi Arabia raised VAT from 5 to 15 per cent, as part of austerity measures to support its economy.

Al Jadaan expected the Kingdom’s general budget to record a deficit by the end of this year, saying that his country is planning to maintain spending control despite the increase in revenues. “We need to continue working efficiently, and we may raise public spending, but any increase in spending items in the future, including the salaries of government employees, will be to cover inflation,” the minister highlighted.

Speaking about energy markets, Al Jadaan emphasised that investment in fossil fuels is important and necessary for the world economy, and the real challenge is not in oil but in gas.” He added that any failure in such investments will cause a major energy crisis in the world.”