Saudi Arabia should double VAT to 10%

The International Monetary Fund (IMF) has recommended that Saudi Arabia doubles its VAT rate from 5% to 10%.  

The IMF stated that, with continued depressed oil prices, the kingdom’s deficit is set to continue to grow. It should therefore consider raising its standard VAT rate to 10%. 

Saudi Arabia introduced VAT in 2018. It did so following agreement in 2017 with the five other members of the Arab Gulf Cooperation Council to implement a harmonised VAT union. To date, only Saudi, UAE and Bahrain have introduced the indirect tax regime. Bahrain is expected next; Qatar and Kuwait remain uncommitted on dates.

If Saudi were to move ahead with a rate raise, the IMF suggests it do so in coordination with the other Gulf states. This could mean delaying any rise until at least 2022 as the remaining states launch their VAT regimes.