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.
Comments
Hahahah... What a joke!!!
What these RSS Terrorists contributed for India? They supported British. If you search in history Muslims taught them everything. Even they were not knowing how to bath, how to wear clothes, how to cook, how to build buildings. All the food recipe they learnt from Muslims. These aryans run away from Iran and now looting our India. All the Buildings and culture they are using were built by Muslims. What did they build??? Toilets????
AS PER WIKIPEDIA,
The Mughal Empire (Urdu: مغلیہ سلطنت, translit. Mughliyah Salṭanat)[7] or Mogul Empire,[8] self-designated as Gurkani (Persian: گورکانیان, Gūrkāniyān, meaning "son-in-law"),[9] was an empire in the Indian subcontinent, founded in 1526. It was established and ruled by a Muslim dynasty with Turco-Mongol Chagatai roots from Central Asia,[10][11][12] but with significant Indian Rajput and Persian ancestry through marriage alliances;[13][14] only the first two Mughal emperors were fully Central Asian, while successive emperors were of predominantly Rajput and Persian ancestry.[15] The dynasty was Indo-Persian in culture,[16] combining Persianateculture[8][17] with local Indian cultural influences[16] visible in its traits and customs.[18]
The Mughal Empire at its peak extended over nearly all of the Indian subcontinent[5] and large parts of Afghanistan. It was the second largest empire to have existed in the Indian subcontinent, spanning four million square kilometres at its zenith,[4] after only the Maurya Empire, which spanned five million square kilometres. The Mughal Empire began a period of proto-industrialization,[19]and Mughal India became the world's largest economic power, with 24.4% of world GDP,[20] and the world leader in manufacturing,[21] producing 25% of global industrial output up until the 18th century.[22] The Mughal Empire is considered "India's last golden age"[23] and one of the three Islamic Gunpowder Empires (along with the Ottoman Empire and Safavid Persia).[24]
The beginning of the empire is conventionally dated to the victory by its founder Babur over Ibrahim Lodi, the last ruler of the Delhi Sultanate, in the First Battle of Panipat (1526). The Mughal emperors had roots in the Turco-Mongol Timurid dynasty of Central Asia, claiming direct descent from both Genghis Khan (founder of the Mongol Empire, through his son Chagatai Khan) and Timur (Turco-Mongol conqueror who founded the Timurid Empire). During the reign of Humayun, the successor of Babur, the empire was briefly interrupted by the Sur Empire. The "classic period" of the Mughal Empire started in 1556 with the ascension of Akbar the Great to the throne. Under the rule of Akbar and his son Jahangir, the region enjoyed economic progress as well as religious harmony, and the monarchs were interested in local religious and cultural traditions. Akbar was a successful warrior who also forged alliances with several Hindu Rajput kingdoms. Some Rajput kingdoms continued to pose a significant threat to the Mughal dominance of northwestern India, but most of them were subdued by Akbar. All Mughal emperors were Muslims; Akbar, however, propounded a syncretic religion in the latter part of his life called Dīn-i Ilāhī, as recorded in historical books like Ain-i-Akbari and Dabistān-i Mazāhib.[25]
The Mughal Empire did not try to intervene in the local societies during most of its existence, but rather balanced and pacified them through new administrative practices[26][27] and diverse and inclusive ruling elites,[28] leading to more systematic, centralised, and uniform rule.[29] Traditional and newly coherent social groups in northern and western India, such as the Marathas, the Rajputs, the Pashtuns, the Hindu Jats and the Sikhs, gained military and governing ambitions during Mughal rule, which, through collaboration or adversity, gave them both recognition and military experience.[30][31][32][33]
The reign of Shah Jahan, the fifth emperor, between 1628 and 1658 was the golden age of Mughal architecture. He erected several large monuments, the best known of which is the Taj Mahal at Agra, as well as the Moti Masjid, Agra, the Red Fort, the Jama Masjid, Delhi, and the Lahore Fort. The Mughal Empire reached the zenith of its territorial expanse during the reign of Aurangzeb and also started its terminal decline in his reign due to Maratha military resurgence under Shivaji Bhosale. During his lifetime, victories in the south expanded the Mughal Empire to its greatest extent, ruling over more than 150 million subjects, nearly one quarter of the world's population at the time, with a GDP of over $90 billion.[34][35]
By the mid-18th century, the Marathas had routed Mughal armies and won over several Mughal provinces from the Punjab to Bengal.[36] Internal dissatisfaction arose due to the weakness of the empire's administrative and economic systems, leading to its break-up and declarations of independence of its former provinces by the Nawab of Bengal, the Nawab of Awadh, the Nizam of Hyderabad and other small states. In 1739, the Mughals were crushingly defeated in the Battle of Karnal by the forces of Nader Shah, the founder of the Afsharid dynasty in Persia, and Delhi was sacked and looted, drastically accelerating their decline. During the following century Mughal power had become severely limited, and the last emperor, Bahadur Shah II, had authority over only the city of Shahjahanabad. He issued a firman supporting the Indian Rebellion of 1857 and following the defeat was therefore tried by the British East India Company for treason, imprisoned and exiled to Rangoon.[37] The last remnants of the empire were formally taken over by the British, and the Government of India Act 1858 let the British Crown formally assume direct control of India in the form of the new British Raj.
Aryan cowboys who invaded India, enslved the original inhabitants destroying their culture, imposed Vedic divisive foreign inhuman cast system. India is still suffering from their terror mindset. They are the people who supported the British and responsible for death of millions of Indian freedom fighters. These traitors who licked the British boots, now lecuring us about patriotism. When Mughals came to this land, there was no India, they built India and contributed richly to its history. If these anti-human gang cant digest the truth, let them NOT use any of the Mughal or Muslims contribution and jump into Sarayu or Ganga enmasse.
If Owais is committing intolerance, Oh Blind, deaf, dumb BJP chelas, puffets, what the hell is happening specially in UP, is it tolerance? Killing in the name of gow rakshaks, killing small children, is it tolerance?
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