The Saudis rushed to buy goods, from imported fruit juices to cars, before a huge increase in value-added tax that came into effect today, Wednesday, with the aim of boosting state revenues, amid the most difficult economic downturn in the kingdom’s history.
Over the past few days, supermarkets in the capital, Riyadh, have been crowded, and shoppers have sought to store perishable goods. Furniture and home appliance stores offered discounts to lure buyers.
Najm Al-Otaibi, a car dealer in Riyadh, said people bought before the tax. Jaber Al-Sahari, who works in a gold shop, has spoken of an increase in demand in the past two weeks.
"The cost of living is increasing. I bought some imported food and juices and stored them because the prices would go up," said Sarah, a Saudi mother of two children.
Starting today, Wednesday, the first of July, the value-added tax in Saudi Arabia will be 15% instead of 5%.
Shock among citizens and companies
The Kingdom announced this increase and with it a suspension of the cost of living allowance last May, which shocked the citizens and companies, who were expecting more support from the government.
In June, the authorities increased import duties to contain the enlarged fiscal deficit, which the International Monetary Fund expects to exceed 12% of GDP this year, compared to 4.5% last year.
Abu Omar, an Egyptian expatriate, said that the increase in value-added tax came after reducing salaries by 20% due to the Corona virus crisis.
"Now I have to live with 35% less income, and that will be very difficult with three children," he said.