As taxes bite: Saudi Arabia boosts citizen benefits

Jobless rate among Saudis aged 15-24 years has risen to 32.6%

RIYADH: Saudi Arabia announced on Saturday it had boosted stipends and benefits for citizens to cushion the impact of economic reforms including the kingdom’s first ever taxes after an oil price slump.

Most working Saudi Arabians are employed by the state and, like nationals in other energy-flush Gulf monarchies, have long benefited from a generous welfare system.

After the 2014 oil market crash, Saudi Arabia as well as the neighbouring United Arab Emirates announced a five percent value-added tax on most goods and services which took effect at the start of this year.



In a move that aims to “soften the impact of economic reforms on Saudi households,” King Salman issued a royal decree late Friday ordering a 1,000 riyal ($267, 222 euros) monthly living allowance for military personnel and public servants for a period of one year.

Student stipends will be increased by 10%, an official statement said. The oil-rich Gulf has long been a tax-free haven for both high-income households and migrant labourers, who frequently rely on remittances to support their families back home.

But countries in the region have introduced a series of austerity measures over the past two years to boost revenues and cut spending as the slump in world oil prices led to ballooning budget deficits.

Saudi Arabia has also intensified efforts to boost employment of its own citizens.

The jobless rate among Saudis aged 15 to 24 stood at 32.6% last year, according to the International Labour Organization.

Saudi Arabia posted an economic contraction in 2017 for the first time in eight years due to severe austerity measures.



The coming year’s budget envisions record spending for the kingdom, a move meant to return the economy to positive growth.

Under Friday’s royal decree, troops serving at the border with Yemen, where Saudi Arabia is allied with the government in a war against Shiite rebels, will receive a bonus of 5,000 riyals ($1,333, 1,108 euros).

The state will also cover up to 850,000 riyals ($227,000, 188,000 euros) of the tax on any citizen’s first home purchase.

The statement said the measures were based on “information provided by” Crown Prince Mohammed bin Salman, the king’s powerful son who has steadily consolidated his grip on power since his shock appointment as heir to the throne in June.

Income remains tax exempt.

Published in The Express Tribune, January 7^th, 2018.

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