Saudi Arabia pays less tax and pays more tax

  Under the double blow of the new coronavirus epidemic and low oil prices, Saudi Arabia, a rich oil-producing country in the Middle East, had to adopt fiscal austerity policies. The Saudi National News Agency reported on the 11th that Saudi Arabia will suspend the cost of living allowances to government employees from June 1, and the VAT rate will increase by 10 percentage points to 15% from July 1.

A comparison of the past and present of these landmarks under the global epidemic. The picture shows the King Fahd Library near Riyadh, the capital of Saudi Arabia.

  【Injured “Blood Enrichment”】

  International oil prices have fluctuated downwards since this year, and major oil-producing countries are divided on whether to reduce production. Saudi Arabia suddenly announced a substantial increase in crude oil production in March, and then crude oil prices began to plummet. The impact of the April epidemic caused further imbalances in supply and demand, and crude oil futures prices once fell to a negative value.

  According to Reuters analysis, Saudi Arabia, as the largest exporter of crude oil, suffered severe damage to its economic pillar oil revenue. At the same time, the epidemic prevention and control measures taken by the government may restrict the speed and scale of the economic reforms initiated by Crown Prince Mohammed bin Salman. One of the main objectives of the reform is to diversify the Saudi economy and reduce its dependence on oil revenue.

  Saudi Arabia ’s fiscal data for the first quarter showed that fiscal expenditures exceeded revenues and there was a budget deficit of US $ 9 billion.

  Under the circumstance of reality, Saudi Arabia has no choice but to "save money" even if it is "rich".

  Saudi News Agency quoted Finance Minister Mohamed Jadan ’s statement saying: “These measures are uncomfortable but necessary, the purpose is to maintain medium and long-term financial and economic stability ... as much as possible to survive the unprecedented new crown epidemic crisis . "

  Jia Dan acknowledged that Saudi Arabia ’s non-oil revenues were affected by the stagnation and weakness of economic activities, while the “unplanned” expenditures in the health care sector and economic stimulus programs increased. To maintain operation without affecting the medium- and long-term economic development, it is necessary to cut expenditures more and take measures to support the stability of non-oil revenue. "

  Reuters reported that the Saudi central bank ’s foreign exchange reserves fell to its lowest level in 2011 in March, the highest decline in at least 20 years. Non-oil revenues in the first quarter were $ 34 billion, a 24% decrease from the same period last year, and dragged down overall fiscal revenue by 22%.

  Earlier on the 11th, the state-owned oil company Saudi Aramco announced a substantial reduction in domestic gasoline prices in May, effective immediately: the price of No. 91 gasoline per liter was reduced from 1.31 rials (1 rial to 1.9 yuan) to 0.67 riyals Yes, the 95th petrol fell from 1.46 riyals per liter to 0.82 riyals.

  【Stop subsidies】

  Saudi Arabia has cancelled or suspended operations and capital project expenditures of some government agencies. It has also suspended a total of 26.6 billion US dollars of funding, involving several projects of the "Vision 2030" reform plan and other large-scale investment projects.

  The statement also said that the government has formed a committee to study financial subsidies for public sector employees and contractors, and to make policy recommendations to the government within 30 days. This means that the rich benefits originally enjoyed by those serving the government may be partially "cut".

  Saudi King Salman Bin Abdul-Aziz ordered in 2018 that each government employee pay a monthly subsidy of 1,000 riyals (about US $ 267) as a government increase in domestic gasoline prices and levy value-added Taxation to increase the cost of living compensation. According to government data as of December last year, approximately 1.5 million Saudis were employed by government departments.

  In March, Reuters quoted Saudi sources as saying that various government agencies were required to submit their own budget cut proposals by at least 20%.

  This is the second time the Saudi government has been forced to adopt strict fiscal austerity policies in recent years. At the end of 2015, oil prices fell from a peak, and Saudi Arabia has drastically cut government employees' bonus bonuses, overtime pay and other benefits to reduce expenditures.

  On the social media "Twitter", some government supporters expressed their willingness to cooperate with the austerity policy, "we have to stand with our leaders in difficult days." (Shen Min) (Special Feature for Xinhua News Agency)