Saudi move could be followed by more tax hikes across Arab world

Saudi move could be followed by more tax hikes across Arab world
An Emirati investor reacts to the movement of stock prices at the Dubai Financial Market on October 26, 2008. (File/AFP)
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Updated 11 May 2020

Saudi move could be followed by more tax hikes across Arab world

Saudi move could be followed by more tax hikes across Arab world
  • UAE finance ministry said it denied there were any plans currently to raise VAT
  • The GCC countries have been facing a challenge that did not exist back in 2008, which is the drop in oil prices

ABU DHABI: More Arab economies may need to follow Saudi Arabia in hiking taxes to replenish reserves that have been savaged by the spread of the coronavirus and the collapse of oil prices, say analysts.
The double whammy of the pandemic and the collapse in oil prices could force Gulf states to raise fresh funds through taxation, bond sales and asset disposals.
Saudi Arabia said on Monday it would hike value added tax to 15 percent from the current 5 percent with effect from July 1. However, neighboring UAE was quick to rule out a similar move. In a statement, the UAE finance ministry said it denied there were "any plans currently to raise value-added tax."

(A video explaining some of the measures taken by GCC states to help support their economies)

 

Before the Saudi announcement, the IMF had warned that regional GDP would come under pressure because of low oil prices and reduced consumption.
Its downward revision of more than 4 percentage points of GDP in one year is equivalent to removing $425 billion from the region’s total output. For nearly all countries, these rare worse than those seen during the global financial crisis in 2008.
“Currently, GCC regional economies are under pressure from both the COVID-19 outbreak and the recent decline in oil prices. Other countries are also under pressure because of the economic impact of measures that have been taken to help contain COVID-19 and flatten the curve,” Mark Schofield, tax and legal services leader at PwC Middle East, told Arab News.
A decade ago as the global financial crisis, the Gulf economies at least had a buffer in the form of high oil prices. That is not the case today — forcing governments to consider other options.
In Tunisia, Prime Minister Elyes Fakhfakh said last month that the country may impose taxes on businesses if the government cannot find the funds it needed.
“Some companies have money and have not helped enough to support state efforts ... if we do not reach what we need, we may have to take decisions unilaterally,” Fakhfakh said in an interview with state TV.
When asked if GCC countries might impose taxes to support their economies, Schofield said the taxation policy is a complex area and extends beyond a response to one particular issue.
“Over the long term, with a number of countries having introduced VAT and excise taxes, GCC governments will be thinking about what further tax initiatives make sense in the context of the wider diversification of regional economies,” he said.
He added that taxation was one of many policy tools that could help grow economies.
“There is also a need to compare the taxes introduced with other countries in the region and globally, knowing that most countries levy corporate tax; however, certain GCC member states (e.g. the UAE) do not currently impose corporate tax. Recent trends show an increase in the VAT rate in several global jurisdictions, whereas GCC member-states currently impose the lowest VAT rates globally,” he added.
The introduction of VAT in some Gulf countries in the wake of the 2014 oil price collapse was an important tool to diversify economies that had been too reliant on oil sales according to a 2019 report by the Arab Gulf State Institute.
 “Total revenue collection figures in Saudi Arabia and the UAE exceeded initial expectations, averaging 1.55 percent and 1.79 percent of gross domestic product respectively,” the report said.
But governments considering fresh taxes to plug budgetary gaps will need to consider the impact on people in a parlous financial state as well as foreign investors.
Schofield said any new taxation could impact investment attractiveness – “but the way the new tax systems are designed is as important as the level of taxes levied.”
While the oil rich Gulf states have historically enjoyed an international reputation for being “tax free,” there have long been a number of different taxes in place as well as so-called “stealth taxes” in the form of government fees for various administrative processes.




A lone Kuwaiti trader sits in the near-empty trading room of the stock exchange in Kuwait City on November 16, 2008. The Kuwait Stock Exchange, the second largest in the Gulf, remained closed today after a court ordered trading halted last week to stem heavy losses by small investors as stock markets in the rest of Gulf plunged on the week's opener. (File/AFP)

During the last financial crisis, Gulf states introduced other exceptional measures to strengthen their economies according to a report by Carnegie Endowment for International Peace organization. With the exception of Qatar, GCC central banks lowered policy interest rates, and countries such as the UAE, Oman and Bahrain reduced reserve requirements.
Saudi Arabia, the UAE and Kuwait provided deposit insurance to bank depositors, while Qatar provided capital injections to banks and purchased banks’ holdings of equity and real estate assets.




Relaxed Emirati investors follow the changes in stock prices at the Dubai Financial Market as stock markets in the Middle East, including the oil-rich Gulf, rebounded on October 13, 2008 following a series of local and international measures to try to ease the global financial crisis.(File/AFP)

GCC countries have already started to implement emergency measures to help boost their economies. In Saudi Arabia, the government announced a $31.9 billion stimulus package to lower the economic effects of the pandemic. Bahrain also announced an $11.4 billion stimulus package on March 17 that includes salary payments to the private sector; payment of water and electricity bills for all people and businesses; and the exemption of all individuals and businesses from municipal fees. All these decisions are in effect for three months starting April, state news agency BNA said.
The UAE’s Central Bank announced new procedures on April 5 to ensure liquidity in the banking system in the face of COVID-19, the bank said it increased its stimulus to a total of $70 billion from previously reported $27 billion package.

(Some of the measures taken by GCC countries to strengthen back their economies. Touch the interactive graph.)


Erdogan replaces Turkish trade minister, forms two new ministries

Erdogan replaces Turkish trade minister, forms two new ministries
Updated 39 min 28 sec ago

Erdogan replaces Turkish trade minister, forms two new ministries

Erdogan replaces Turkish trade minister, forms two new ministries
  • In a presidential decree Ruhsar Pekcan was replaced as trade minister by Mus, who has been a lawmaker for Erdogan’s AK Party since 2011

ISTANBUL: President Tayyip Erdogan appointed a prominent member of Turkey’s ruling AK Party, Mehmet Mus, as trade minister on Wednesday and split the Family, Labour and Social Policies Ministry into two ministries.
In a presidential decree Ruhsar Pekcan was replaced as trade minister by Mus, who has been a lawmaker for Erdogan’s AK Party since 2011 and served as the party’s deputy chairman in charge of the economy.
The decree, published in the Official Gazette, gave no reason for the change, but it comes after opposition politicians accused Pekcan’s ministry of buying supplies from her family-owned company and called on her to resign.
The Trade Ministry confirmed that the purchase of sanitisers had been made, but said in a statement on Tuesday the choice was based on price alone and not due to “the name of the company making the sale.”
It said that the sale, worth some 500,000 lira ($62,000), had been carried out in line with relevant regulations.
Erdogan’s overnight changes come amid speculation over a wider cabinet reshuffle, after he changed the country’s top economic management in November, including the central bank governor.
The president established two new ministries by splitting the Family, Labour and Social Policies Ministry into two separate ministries, according to the decree.
He appointed Derya Yanik as Family and Social Policies Minister and Vedat Bilgin as the Labour and Social Security Minister, replacing Zehra Zumrut Selcuk.


Saudi Arabia to raise $800m from privatization of two flour mills.

Saudi Arabia to raise $800m from privatization of two flour mills.
Updated 21 April 2021

Saudi Arabia to raise $800m from privatization of two flour mills.

Saudi Arabia to raise $800m from privatization of two flour mills.
  • The National Center for Privatization & PPP (NCP) said it completed the sale of the two mills (MC2 and MC4) to private sector investors

DUBAI: Saudi Arabia is set to generate about SR3 billion ($800 million) in proceeds from the privatization of two flour mills.
The National Center for Privatization & PPP (NCP) said it completed the sale of the two mills (MC2 and MC4) to private sector investors.
A consortium that includes Abdulaziz Alajlan & Sons Company for Commercial and Real Estate Investment, Al Rajhi International for Investment, National Agricultural Development and OLAM International acquires the second milling company (MC2) for about SR2.14 billion, according to a stock exchange filing on Wednesday.
Meanwhile a consortium that includes Abdullah Al-Othaim Markets Company, Allana International Company and United Feed Manufacturing Company secured the fourth milling company for SR859 million.
Saudi Arabia is accelerating plans to privatize key infrastructure in an effort to modernize the economy, speed major infrastructure works and develop its financial services sector.


AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?

AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?
Updated 21 April 2021

AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?

AirTag or purple iPhone? Where and when can I buy Apple’s latest launches?
  • Good news for Apple fans in the Gulf – all the new products will be available in the region as early as the end of April

DUBAI: Apple just held its first keynote event of the year – announcing new products such as a button-like accessory to help people keep track of their belongings, as well as updates for existing models including a purple iPhone 12.
Good news for Apple fans in the Gulf – all the new products will be available in the region as early as the end of April.
Here are the new products launched during the Apple event in its Cupertino headquarters, and their prices and availability status in the UAE:

AirTag
Price: Starting 129 dirhams
Availability: Pre-order starts on April 23; product is available on April 30


24-inch iMac (available in seven different colors)
Price: Starting 5,499 dirhams
Availability: Pre-order starts on April 30; product is available in the second half of May

Apple TV 4K
Price: Starting 729 dirhams
Availability: Pre-order starts on April 30; product is available in the second half of May

iPad Pro with M1 chip
Price: Starting 3,199 dirhams
Availability: Pre-order starts on April 30; product is available in the second half of May

Other announcements:
The new purple iPhone 12 has no other updates other than the color – it will be the same price as the other iPhone 12 models.
The new iOS 14.5 will be launched next week. It comes with the biggest privacy changes Apple will introduce so far, according to a statement.


More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu
Updated 21 April 2021

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu

More jobs advertised for Saudis by Royal Commission for Jubail and Yanbu
  • The Kingdom has stepped up efforts to secure more jobs for its citizens in line with similar localization efforts underway elsewhere in the region

RIYADH: The Royal Commission for Jubail and Yanbu (RCJY) has advertised 96 jobs for Saudis on its website, in Riyadh, Jazan, Jubail and Yanbu.
They cover administrative, engineering and health roles.
Among the advertised positions are a financial planning specialist, director of transportation and equipment department, director of buildings department, and director of public facilities department.
The Kingdom has stepped up efforts to secure more jobs for its citizens in line with similar localization efforts underway elsewhere in the region.
The Royal Commission for Jubail and Yanbu (RCJY) was established by royal order in 1975 to kickstart the Kingdom’s petrochemicals industry.


WH Smith to open at King Abdulaziz International Airport in Jeddah

WH Smith to open at King Abdulaziz International Airport in Jeddah
Updated 21 April 2021

WH Smith to open at King Abdulaziz International Airport in Jeddah

WH Smith to open at King Abdulaziz International Airport in Jeddah
  • Airport retail may rebound on travel resumption
  • Pandemic culls names across retail sector

DUBAI: British retailer WH Smith is coming to King Abdulaziz International Airport in Jeddah.
Tihama Advertising, Public Relations and Marketing Company has agreed a deal with the General Authority of Civil Aviation to lease two units at the airport, it said in a Saudi stock exchange filing.
Tihama Education, a unit of the Tadawul-listed company, will operate two outlets under the WH Smith brand franchise, covering arrivals and departures.
Tihama has an existing partnership with WH Smith at Riyadh Airport and in the UAE.
WH smith did not respond to a request for comment.
Founded in 1792, WH Smith is one of the oldest names on the British high street and has also become one of the world’s leading travel retailers operating over 1,100 stores in 31 countries.
Retailers have suffered from the impact of more than a year of intermittent lockdowns worldwide but the transport-focused end of the retail business may stand to benefit from a resumption of international air travel.
Analysts at RBC upgraded WH Smith to ‘outperform’ from ‘sector perform’ last week and lifted their price target on the stock to 2,200p from 2,100p.