A proposal to introduce an income tax has not been taken up at level of government, Saudi Arabia has clarified. Recently, the kingdom raised VAT to 15% from 5% to plug fiscal deficit and counter COVID-19 induced contraction. Image Credit: Gulf News Archive

Abu Dhabi: Saudi Arabia has clarified that introducing an income tax is not under discussion. And that the subject has not been raised at the cabinet or any government level, Saudi Press Agency reports.

This followed a report in Bloomberg that quoted Finance Minister Mohammed Al Jadaan as saying the “kingdom hasn’t ruled out income tax”.

Bloomberg had reported Saudi Arabia is accelerating plans to sell off state assets and isn’t ruling out introducing income tax as it seeks to boost state coffers hit by the slump in oil prices.

“The world’s biggest oil producer could raise more than 50 billion riyals ($13.3 billion) over the next four to five years by privatizing assets in education, health care and water sectors,” Al Jadaan said.

At the Bloomberg event, the minister said the government is "considering all options" to bolster finances, and while income tax isn't "imminent" and "would require a lot of time" to prepare, the kingdom "isn't ruling anything away for now."

The government has already taken unprecedented measures to support its finances, including tripling value-added tax, increasing import fees, and canceling some benefits for government workers. The kingdom has traditionally been tax-free for individuals, with oil revenue supporting a wide range of subsidies and benefits for citizens.

"Saudi Arabia is not in austerity and we are not getting into an austerity phase," Al Jadaan said. While the government has "re-allocated some spending," total spending in 2020 is likely to be more than a trillion riyals, as planned.

Not tightening the belt

The kingdom is also likely to have to borrow about 100 billion riyals more than planned this year and plans to tap the global debt market at least one more time in 2020 after so far selling $12 billion in international bonds in 2020, Al Jadaan said.

Despite efforts to contain costs, the government also transferred $40 billion from reserves held by the central bank to boost the financial firepower of its sovereign wealth fund for deals. The Public Investment Fund has already acquired stakes in companies including Citigroup Inc., Facebook Inc. and concert promoter Live Nation Entertainment Inc.