New labor drive targets cover-up businesses

May 11: Saudi Arabia will triple its value-added tax rate and suspend a cost of living allowance for state workers, it said on Monday, seeking to shield finances hit by low oil prices and a slump in demand for its lifeline export worsened by the new coronavirus.

Historic oil output cuts agreed by Riyadh and other major producers have given only limited support to prices after they sank on oversupply caused by a war for petroleum market share between the kingdom and its fellow oil titan Russia.

Saudi Arabia, the world's largest oil exporter, is also being hit hard by measures to fight the new coronavirus, which are likely to curb the pace and scale of economic reforms launched by Crown Prince Mohammed bin Salman.

"The cost of living allowance will be suspended as of June 1, and the value added tax will be increased to 15% from 5% as of July 1," Finance Minister Mohammed al-Jadaan said in a statement reported by the state news agency. "These measures are painful but necessary to maintain financial and economic stability over the medium to long term...and to overcome the unprecedented coronavirus crisis with the least damage possible."

The austerity measures come after the kingdom posted a $9 billion budget deficit in the first quarter.

The minister said non-oil revenues were affected by the suspension and decline in economic activity, while spending had risen due to unplanned strains on the healthcare sector and the initiatives taken to support the economy.

"All these challenges have cut state revenues, pressured public finances to a level that is hard to deal with going forward without affecting the overall economy in the medium to long term, which requires more spending cuts and measures to support non-oil revenues stability," he added.

The government has cancelled and put on hold some operating and capital expenditures for some government agencies, and cut allocations for some reform initiatives and projects worth a total 100 billion riyals ($26.6 billion), the statement said.

Central bank foreign reserves fell in March at their fastest rate in at least 20 years and to their lowest since 2011, while oil revenues in the first three months of the year fell 24% from a year earlier to $34 billion, pulling total revenues down 22%.

"The reforms are positive from a fiscal side as greater adjustment is essential. However, the tripling of VAT is unlikely to help that much in 2020 revenue wise with the expected fall in consumption," said Monica Malik, chief economist at Abu Dhabi Commercial Bank.

She said she kept unchanged her deficit forecast of 16.3% of GDP for this year, which already factors in a greater than previously announced spending cut.

About 1.5 million Saudis are employed in the government sector, according to official figures released in December.

In 2018, Saudi Arabia's King Salman ordered a monthly payment of 1,000 riyals ($267) to every state employee to compensate them for the rising living costs after the government hiked domestic gas prices and introduced value-added tax.

DIFFICULT TIMES

A committee has been formed to study all financial benefits paid to public sector employees and contractors, and will submit recommendations within 30 days, the statement said.

In late 2015, when oil prices fell from record highs, the kingdom slashed lavish bonuses, overtime payments and other benefits once considered routine perks in the public sector.

In a country without elections and with political legitimacy resting partly on distribution of oil revenue, the ability of citizens to adapt to such reforms is crucial for stability.

"Tripling the VAT will test the limits of the balance between revenues and consumption as the economy dives into a deep recession. The move will impact consumption and could also lower the expected revenues," said John Sfakianakis, a Gulf expert at the University of Cambridge.

"These are pro-austerity and pro-revenue moves rather than pro-growth ones," he said.

Hasnain Malik, head of equity strategy at Tellimer, said the VAT rise could bring about $24-$26.5 billion in additional non-oil fiscal revenue. The rise would hit consumer spending further but was a needed step towards fiscal sustainability, he said.

Jeddah, Jul 26: The city of Makkah is opening its arms again to welcome pilgrims for the annual Hajj — although only a handful compared with previous years.

Because of the COVID-19 pandemic, this year’s event is limited to about 1,000 pilgrims, all from inside Saudi Arabia, about 700 of whom are expatriates.

Abdullah Al-Kathiri, an Emirati and a recovered COVID-19 patient, postponed his pilgrimage last year because it coincided with his wedding plans. “I’ve heard from many who’ve performed the pilgrimage in past years that it was always a smooth process, even with the massive numbers,” he said. “So you could imagine how it would be with the limited number of pilgrims this year. Surely it will be a great experience.”

Khadija, a Bulgarian expatriate, was overcome with tears when she heard she would be performing Hajj this year. “I didn’t expect they’d accept,” she said. “I’m sure this year’s Hajj will be an exceptional one in all respects.”

Dr. Haifa Yousef Hamdoon, a Tunisian physician in Qassim, is another who did not expect to be accepted because of the low numbers this year. “When I received confirmation of my request, I was overjoyed and couldn’t believe it,” she said.

Mu’taz Mohamed, a Sudanese pilgrim who also lives in Qassim region, praised the preventive and precautionary health measures taken in order to ensure his safety and that of other pilgrims, to enable them to perform the rituals safely.

After completing their arrival procedures, the pilgrims were taken to their accommodation in Makkah, supervised by the Ministry of Hajj and Umrah. They will stay there for four days before beginning their pilgrimage on July 30.

Jeddah, May 18: Saudi Arabia’s Grand Mufti and head of the Council of Senior Scholars and the Department of Scientific Research and Ifta Sheikh Abdul Aziz Al Asheikh ruled that it is permissible to perform Eid Al-Fitr prayer at home under exceptional circumstances similar to the current pandemic situation. The prayer consists of two rakats with reciting more numbers of takbeer and without a sermon.

Speaking to Okaz/Saudi Gazette, he said that Zakat Al-Fitr could be distributed through charitable societies if they are reliable ones, with the condition that it should be distributed before the day of Eid. The Grand Mufti urged parents to bring joy and happiness to their children and their families by spending more on them.

Meanwhile, Sheikh Abdul Salam Abdullah Al-Sulaiman, member of the Council of Senior Scholars and the Standing Committee of Fatwa, said that Eid prayer could be performed individually or in congregation.

Speaking to Okaz/Saudi Gazette, he said that the worshiper will recite takbeer to start salat and then follow it with six more takbeer in the first rakat before reciting Fatiha loudly and then it is ideal to recite Surah Al-Qaf.

In the second rakat, there will be five takbeer after the takbeer at the start of the rakat before starting to recite Surah Fatiha and then Surah Al-Qamar, following the example of the Prophet (peace be upon him). It is also ideal to recite Surah Al-A’la and Al-Ghashiya instead of Al-Qaf and Al-Qamar in each rakat respectively.

Sheikh Al-Sulaiman also cited the example of Anas Bin Malik, a prominent companion of the Prophet (pbuh). When Anas (May Allah be pleased with him), was at his home in Zawiya, a place near Basra, he did not find any Eid congregation prayer and therefore he performed prayer along with his family members and his aide Abdullah Bin Abi Otba.

The scholar said that the time for Eid prayer begins after sunrise and the best time is after the sun rises by the height of one or two spears as agreed by most scholars. This means 15 or 30 minutes after sunrise and its time continues until the end of the time of the Duha prayer; that is before the Zuhr prayer begins.

The prayer is forbidden at the moment when the sun rises, and the majority of jurists, including the schools of thought of Shafi, Maliki, and Hanbali opposed prayer at sunrise and favored to perform the prayer only after the sun rises by the height of one or two spears in the sky.

Regarding the recitation of takbeer on the occasion of Eid Al-Fitr, Sheikh Al-Suleiman said that it should begin during the night of the Eid and continue until the beginning of the Eid prayer.