Saudi Arabia may widen its tax net

Significance

The finance ministry has sought to boost non-oil revenue by increasing the value-added tax (VAT) rate and other measures. The finance minister has also floated the possibility of introducing income tax in the medium term.

Impacts

• Spending on public sector salaries could remain consistently higher than revenue from oil exports.
• Raising the income tax option, although controversial at home, might provide some reassurance to external creditors.
• The withdrawal of cash benefits compensating for the 2018 fiscal measures will hit household budgets hard.