Saudi Arabia imposed 5 percent VAT

Saudi Arabia imposed Value Added Tax and also announced to increase the petrol prices up to 127 percent. The increase in petrol prices came as a big shock for the motorists on the eve of New Year. The main aim of the introduction of both measures is to boost the revenues. Saudi Arabia is facing huge budget deficits from last two years because of low oil prices. Saudi economy is dependent on oil to generate revenues.

The hike in fuel duty in Saudi Arabia was the second in two years. But it still leaves petrol prices as some of the lowest in the world. High-grade petrol rose 127 percent from 24 cents a litre ($1.09 a gallon) to 54 ($2.46), while low-grade petrol rose 83 percent from 20 cents a litre (91 cents a gallon) to 36.5 ($1.66).

 Saudi Arabia has introduced a raft of measures to raise revenue and cut spending as it bids to balance its books. Last month, it slashed the government subsidy on electricity supply, leading to a sharp rise in bills. Saudi Arabia has deposited billions of dollars in special accounts to help needy citizens face the resulting rise in retail prices.

Saudi Arabia will continue to face the budget deficits until 2023. Its budget deficit amounted to $260 billion over the period of 4 years. Saudi Arabia has already consumed $250 billion from its reserves to plug the gap between income and expenditures. The reserves fell to $490 billion. It has also borrowed around $100 billion from the international and domestic markets.