JEDDAH: Like many countries around the world, Saudi Arabia suffered from tax evasion by some private companies and individuals, exploiting the traditional paper system which used to link government agencies with each other until the transaction later reached the Department of Zakat and Income Tax (DZIT), the body which collects zakat and taxes.

Over the last five years the department made a quantum leap in its electronic systems, driving other relevant government agencies to tighten the loopholes that were used in tax evasion practices.

The latest development achieved by the tax collection body in this regard was signing a contract with SAP, which provides the best system to help administrators effectively carry out tax collection and offers revenue management services.

The system facilitates linkage between the tax department and the relevant bodies, including the smooth online submission and listing of financial statements of companies. The application of this system started earlier this year and it compels accountants to electronically list and post financial statements.

These efforts contributed to increasing tax revenues and zakat to 100 percent in the past five years. In 2009, revenues amounted to SR14 billion and reached SR28 billion in 2014. By the end of this year, revenues from taxes and zakat are expected to exceed SR30 billion.

Saleh Al-Awaji, deputy director general for supporting operations at DZIT, said the department has used several means during the past five years including huge efforts to correct tax payer data such as their addresses and ways of contacting them. “This was achieved through the close cooperation with the Saudi Post,” he added.

Alawaji explained that the tax collection body directed tax payers through its online portal to give accurate information before they electronically submit their financial statements.

“The department stopped receiving manual “or in person” financial statements for more than 80 percent of tax payers. Very soon all financial statements will be 100 percent electronically submitted,” he said.

By comparing data of registered and non-registered establishments at the tax department with those registered at the Ministry of Commerce and Industry it turned out that more than 180,000 companies did not register their activities at DZIT although they have active commercial registrations, said Alawaji.

The efforts of DZIT were not limited to tracking down tax evaders, but found that there are imports which are not defined by commercial registries, according to Saudi Customs data.

“We are currently working on defining them with the Ministry of Commerce and Industry, and Saudi Customs. We are also checking Ministry of Labor and the contracts which the ministry submitted to ask for visas to estimate the commercial volumes of entities,” he said.

In addition, DZIT closely cooperates with the Ministry of Interior, the National Information Center and the Saudi Arabian Monetary Agency (SAMA) to exchange information and collect the entitled taxes. The body also cooperates with the Ministries of Haj and Labor, the Saudi Commission for Tourism and National Heritage (SCTNH), Saudi Post and other government bodies.