Saudi VAT impact: Price hike ‘will push consumers to find ways to save money’

Updated 25 November 2017

Saudi VAT impact: Price hike ‘will push consumers to find ways to save money’

JEDDAH: The introduction of value-added tax (VAT) next year will directly impact the prices of commodities and services, analysts said.
“The price increase will reduce the demand for goods, and this will have a negative effect on companies, most of which will likely take several measures to keep their business,” Khalid Al-Zaidi, a financial analyst, told Arab News.
He hoped the price rise would not affect the quality of goods and services. “If it happened, it is a negative indication. However, the price hike will push consumers to find ways to save money,” he said. Businesses must register for VAT by the deadline of Dec. 20, and the official introduction starts on Jan 1.
Al-Zaidi also said there would be a sharp drop in demand for luxury goods and accessories.
He anticipated that companies will be keen to improve their services at competitive prices, especially with the opening of international markets through e-commerce. He stressed that the best service-providers with the lowest costs will succeed in the market, while other businesses will fail.
Al-Zaidi, who is also the director of the Jeddah-based Al-Zaidi Financial Education Center, said that it is possible that the government will impose additional taxes on other products or increase VAT from 5 percent.
“If the results are found to be supportive to the country’s economy and helps citizens to rationalize their consumption habits, additional taxes will be implemented,” he said.
On the up side, Al-Zaidi said that once VAT is imposed on petroleum products, the country will be able to cut domestic consumption of oil products.
“This will help Saudi Arabia increase the quantity of its oil reserves and enable it to increase its export of oil to the international market,” he said.
He added that this could support its global position as an important player in the oil market. “It will also strengthen its oil pricing policy inside OPEC (the Organization of the Petroleum Exporting Countries),” he said.
Al-Zaidi anticipated that small and medium-sized companies will find it difficult to adapt to VAT, making it difficult to significantly reduce their expenses to survive.
As for imposing VAT on private education, Al-Zaidi said that investors in this sector would reduce fees to retain their market share. “Otherwise, their investment would be severely affected,” he said.
Khaldoun Khan, the owner of Al-Corniche International School and Al-Faisal International School, told Arab News that students’ guardians would be affected by the decision, and he would not increase registration fees. He said that his schools would lose some students. “Students have started to join state schools due to the decision,” he said.
Khan said that he would have another look at the profits and consider providing students with attractive offers to keep his business alive. “Unless the government reviews the decision, many school owners will choose to close their schools,” he said.
The General Authority of Zakat and Tax (GAZT) has urged businesses with annual revenues of more than SR1 million ($266,640)  to expedite their VAT registration process and ensure their readiness for its implementation.
More than 60,000 businesses have registered for VAT since registration started on Aug. 28, 2017.
Businesses that fail to register in time will face fines of up to SR10,000 and the suspension of several critical government services, including issuing work permits, changing business activity, issuing visas, transferring workers’ sponsorship and other services provided by the Ministry of Commerce and Industry, the Ministry of Labor and Social Development, the Ministry of Municipal and Rural Affairs, Saudi Customs and the Saudi Arabian Monetary Agency.
The GAZT confirmed that VAT will be implemented on Jan. 1 next year, and that all eligible businesses must be ready and aware of its laws, regulations and requirements — available on the VAT website vat.gov.sa.
The GAZT first imposed a selective tax on energy drinks, cigarettes and soda drinks. It also increased the visit visa fee, exit re-entry fee and dependent fee for expatriates.


Study says work-life balance disturbed by remote working culture

Updated 15 min 7 sec ago

Study says work-life balance disturbed by remote working culture

RIYADH: In the wake of the coronavirus disease (COVID-19) outbreak, governments around the world introduced strict measures to curb its spread.

Due to the unavailability of a vaccine against the virus, social distancing is here to stay for the foreseeable future.

And with stringent coronavirus measures, companies have made arrangements for employees to work from home. As there is no clarity about an end to this viral outbreak, debate on work-life balance has been ignited.

A new study titled “How COVID-19 changed the way people work” — conducted by global cybersecurity company Kaspersky — reveals how quarantine has influenced how people work from home.

The “new normal” that workers are now facing is starting to have an impact on their work-life balance.

Nearly a third (31 percent) of workers said they are spending more time working than they did before. However, 46 percent said they have increased the amount of time they spend on personal activities.

This increased time on “personal activities” may be attributed to the fact that many people do not have to spend time commuting.

The study added that it has become harder for workers to separate working and personal activity, especially when it comes to IT.

It further stated that 55 percent of workers are now reading more news compared with life before the pandemic.

Workers are also developing a habit of using personal services for work, increasing digital risks, including the disclosure of sensitive information. 

Some 42 percent of employees use personal email accounts for work-related matters, and 49 percent admit their usage has increased when working from home. 

“Organizations cannot just fulfill all user requests, such as allowing staff to use any services. It is necessary to find a balance between user convenience, business necessity and security. To achieve this, a company should provide access to services based on the principle of only supplying minimal and necessary privileges, implement a VPN and use secure and approved corporate systems,” said Andrey Evdokimov, chief information security officer at Kaspersky.

He added: “These types of software may have certain restrictions that slightly reduce usability, but offer greater assurances in providing security measures.”

Dr. Waquar Ahmad Khan, an assistant professor at Taibah University, Madinah told Arab News: “The COVID-19 outbreak and the subsequent work-from-home imperatives and lockdowns have led to significant changes in the workings and lifestyles.”

He highlighted that working from home has both positive and negative aspects. 

“Being an academic I can say that teaching is an occupation with low suitability to work from home. To teach remotely without socializing can compromise both teachers and students’ academic performance and mental health,” he said.

There are other issues from the new working culture. Support from colleagues is now harder to find, at least face-to-face, he said, adding that anxieties about the public health issues itself are high.

Dr. Majed Al-Hedayan, a legal expert, told Arab News that the pandemic has led to a restructuring of the concept of job commitments.

“It has become an ambitious and optimistic view contrary to what it was before the pandemic that the performance of workers was below the level of ambition,” he added.

“This motivates public and private entities to adopt a methodology for remote working in the coming period after the pandemic,” said Al-Hedayan.